“We used to be even better than this,” the Vice President of one of the world’s largest distributors said to me as we were taking a tour of the distributor’s facility. The Vice President was responding to how impressed I was with the consistency of the answers and actions I was hearing and seeing from the various people I was meeting.
In other words, the distributor’s institutional memory was really high. The day culminated with a meeting with the CEO. Yet again, I was really impressed.
I was hearing the same thought process from the CEO that I heard from the other employees I met with during the day.
It was clear that everyone working at the distributor took the lead from the CEO. And that’s the way it is at all companies.
And not surprisingly, your company’s institutional memory and reuse of lessons learned starts with you, the CEO.
You have to believe in learning from your past mistakes. If you don’t learn from your past, then nobody else will.
That sounds pretty simple. And it is, but there’s a lot of nuance.
Years ago, I worked for a CEO who thought he was a great teacher. He loved preaching and sermonizing to the management team and employees how things should be done.
The problem was there no consistency or follow-through from the CEO.
Let me give you an example.
The company had three divisions. The largest division of the company had a strategy that seemed to vary from day to day.
One day, the division was focused on computing. The next day, after the CEO met with some market analysts, the division was going to focus on wireless phones. The next day, after meeting with yet another analyst, the division was going to focus on solar.
What does this have to do with institutional memory? Everything.
The CEO had forgotten the lessons he should have learned from the company’s past failures. He had forgotten where the company’s strategic advantages were (Hint: it wasn’t in wireless phones or solar).
The company got its head handed to it. The company’s market share kept going down. Employee turnover was high. And the company’s value kept going down. Eventually, activist investors forced the CEO to sell his company.
That’s what happens when you don’t have institutional memory. Your company will likely go backwards too if you and your team don’t have institutional memory.
The stakes are unbelievably high to get institutional memory to stick inside your company. The process is straightforward, yet too many CEOs get this wrong. As I said, there’s nuance.
The nuance to get institutional memory to stick comes from how you teach and train your team.
It always starts with you the CEO. You have to be constantly and consistently teaching your company values to your team.
There are five key steps you need to take to develop institutional knowledge in your company. These steps are:
A. Own your mistakes when you screw up.
No one is perfect, and I guarantee you’re going to make your share of mistakes as CEO. Own them.
Tell your team you screwed up. Explain where you went wrong, and what you’ll do better next time.
You’ll build empathy and trust by admitting your shortcomings. Don’t worry about your team losing faith in you. You’ll likely find your team will trust and believe in you more when you admit your mistakes.
B. Give your team the autonomy to make decisions for their area of the company.
Letting your team make decisions is the best way for them to learn. And it gives you a great way to give constructive feedback to your team.
This doesn’t mean you give up authority by delegating decisions to your team. You’re going to keep the big, make or break decisions for yourself.
However, you’ll find delegating down in the organization is a double win. You’ll be freed up to spend more time on the key, make or break things in the company. Your team will gain invaluable knowledge and experience by taking on more responsibility and decision making.
You’ll find your team will make some really good decisions; these are the ones you want to reinforce. And obviously, your team will make some bad decisions that will become teachable moments.
C. Use a velvet hammer when you’re giving feedback to your team.
I worked for someone years ago who I learned a ton from. Some of the things were good, and some of the things were not so good.
One of his favorite phrases was, “Use a velvet hammer” when you give feedback to someone. You would think he meant, “be firm, but gentle.” At least that’s what I thought.
Instead, my old boss provided feedback with what seemed a sledgehammer. That’s the wrong way.
The right was is to be firm, and be gentle. You want to encourage your team to take chances. Your team will become too conservative, and they will not learn from their mistakes if you come down on them like a sledgehammer each time they make a mistake.
D. Be consistent.
You, unlike the CEO worked for years ago, want to be consistent. Consistency, along with owning your mistakes, giving your team autonomy, and using a velvet hammer is the final piece for institutional memory to take hold.
Day in and day out, if you provide you team with consistent feedback, your team will learn “the way things are done” at your company. Your team will resemble the impressive team at the distributor I visited years ago.
E. Finally, hire smart.
None of these steps are going to matter unless you build a great team. So maybe I should have put this as the first step?
Have you ever tried giving feedback to a mediocre team? It’s painful isn’t it?
Sometimes a mediocre team follows the guidance you are providing, and sometimes a mediocre team completely ignores you. That’s why the first key to building a successful organization is always building a great team.
Your great team will take the direction and feedback you are giving. Your great team will institutionalize your feedback.
And your great team will do the last important step for institutional memory to take hold. Your great team will teach and train others in the way things are done.
That’s when you know your company will build and maintain institutional memory.
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