by: Robert Reiss, Founder and CEO of CEO Forum, Contributor Leadership Strategy
Robert Reiss: Larry, you built a reputation as the creator of identity-based management, the discipline where you help companies clarify how they create unique value in the marketplace. Three years ago, you went into a huddle with two partners and have now come back to show me something that I think has the potential to be a revolution in management thinking. What have you discovered that’s so new and important?
Larry Ackerman: Yes, Robert, I’ve been consulting to large organizations for many years, clarifying for them the core of how they create value based on knowing who they really are. In our new work, we have gotten to the roots of these ideas, and evolved them into a complete enterprise operating system.
RR: Are most organizations running under some kind of operating system currently?
LA: They are, whether they realize it or not. Most of these have evolved over the decades, but are essentially still command and control systems that are based on a belief that organizations are essentially machines, and that people in them are components. But the work of the Identity Dynamics Institute begins by seeing organizations as living, vibrant entities, not as machines.
RR: Do you believe organizations are actually alive?
LA: Absolutely. They are designed by us to organize and extend what people are capable of creating, and ultimately, achieving progress for society while making money. If we can see clearly how that energy flows through organizations, and minimize impediments, we can help organizations reach their full potential, and keep them healthy over the very long term.
RR: What are you calling this enterprise operating system? LA: We call it Vivo, meaning operating in a living system.
LA: The greatest stress a CEO faces is to be comfortable that they’re making the best possible decisions over time. Vivo identifies the 12 key vital signs that the CEO needs to monitor and manage. With these clearly in sight, and with a deep comprehension of the unique identity of her organization, the CEO will inherently be in the flow of the organization’s ongoing story and will have a surer sense of what will be the best choices and initiatives through tough times as well as the potentially expansive times now emerging.
RR: Does identity-based management change the role of the CEO?
LA: For those CEOs who already have a deep knowledge of the identity of their organizations, there will be a greater comfort level with decision- making in general. For CEOs who are attempting to impose their will on an organization, they’re going to need to take a step back and try to see how what they believe to be true aligns, or doesn’t align, with the identity of their organizations. For many CEOs, when they get that alignment, that’s going to be the start of a beautiful friendship.
RR: For a CEO wondering if shifting to identity-based management might be worth the risk of change, what kinds of symptoms or red-flags would tell him or her that now is the time?
LA: Anything that seems to be making the organization less than agile. It could be loss of market share; it could be alarming levels of turnover; it could be a general feeling that it’s really hard to get things done. And for CEOs, maybe the biggest red flag would be that they’re feeling uncertain that the big decisions they’re making are likely to be, consistently, the best decisions.
RR: So, identity-based management makes decision-making easier?
LA: Maybe not easier, since big decisions always contain high levels of risk, and the danger of being wrong carries serious costs. Think about the big decisions you make as an adult — if you know who you are, what you’re really good at, and what you
Larry Ackerman: the visionary who created the discipline of Identity-Based Management
have to contribute to the world, then you are going to be pretty confident that you’re making the right decisions for the right reasons. Identity-based management is very similar to that — when you really know how and what your organization is driven to do, and that knowledge is always front and center, then you’re going to consistently make the right decisions, and you’re going to be comfortable with the results
RR: I know that your Vivo system has a lot to say about attracting the best talent, and creating an environment in which that talent can develop to its optimal level. How is your thinking about talent different than other approaches?
LA: Without critiquing the thinking that’s out there, once you’ve begun to start thinking about your organization in an identity-based way, then your process for attracting and onboarding talent inevitably changes, whether that’s young recruits or even senior-level executives. As you’re able to see how your own organization is inherently unique, you begin to see every candidate as either an ‘identity fit’ or not. If we’re now clear that our identity is highly related to, for, let’s say, enhancing the quality of nursing care in the hospital setting, then when we talk with candidates we’ll, first of all, be clear about what we’re passionate about, and then we’ll be able to hear if the candidate shares that passion, too. If, for instance, they’re highly experienced in nursing or care management in general, but driven to extract ever-greater efficiency, then that person is probably not the right one for us.
RR: CEOs are always under a lot of pressure to improve quarterly results. Will identity-based management help them achieve better quarterlies?
LA: Ultimately, identity-based management will shift the conversation to whether we’re getting the best results in any given time frame, while also making sure that we’re always increasing the overall worth of the organization for the medium and long term. We’ve all seen that focusing only on short term results can be pretty destructive over time — not just in personal burn out, but in actual damage to the company, its brands, and investment for the future.
RR: We’ve seen many, if not most CEOs, expressing their desire to lead their organizations toward being better citizens in a broader understanding of who their stakeholders are. Does identity-based management have anything to offer in making this happen?
LA: Identity-based management is an enterprise operating system, and it is intended to guide organizations in becoming their best possible selves. The Institute believes that a thriving organization will naturally create three different kinds of wealth — each of which is necessary for long-term health, not just of the organization but of the larger community of stakeholders.
RR: So, what are they?
L.A. First there’s Economic Wealth, which includes revenue and income growth, margin improvement, and increasing shareholder returns, resulting in financial strength over the long term — not just quarterlies. Our system seeks to detect the great danger to long-term economic health — short-termism. Vivo builds reinforcing systems that will keep short- termism from weakening the organization.
The second wealth is Reputational Wealth. This may be the most vulnerable of the three, since it is based on trust. Reputational wealth includes strong brands, broad stakeholder trust and loyalty, including people’s willingness to suspend disbelief and give the company the benefit of the doubt when necessary, and an overall positive image. The vigilance that builds and sustains Reputational Wealth, if guided by the constant deployment of the organization’s identity, will act as a powerful deterrent to actions or products that might diminish trust in the marketplace.
The third wealth that Vivo nurtures, is Institutional Wealth, which includes high-value intellectual property, organizational wisdom developed and shared over time, ongoing talent development, and cultural cohesion. With identity-based management, the organization thrives on its ability to learn from the marketplace.
These are the three wealths that we seek to maximize — which means we build systems that will enhance them. With identity-based management, the Board and the CEO can agree on shared goals about achieving not only solid financial returns, but also measuring and valuing the other two wealths, reputational and institutional. The CEO and the top team will be rewarded when all three wealths are expanding. At the same time, short- term performance demands will be well-served without damaging the long- term health of the company.
RR: Larry, your background includes many years with some of the great branding firms, so you probably have some thoughts on how identity- based management changes thinking about brands.
LA: Just a few…
RR: Your belief that organizations can have really long, thriving lives is quite inspiring. Does the same apply to brands? Can they live forever?
LA: It would be nice if they could, but the marketplace is dynamic. What we can do to greatly enhance the life and strength of brands is to be clear that our brands, as much as possible, are expressions of the identity of the organization. In other words, if we need a new product and attempt synthesize it, it could end up lacking the authenticity it needs to have a long life. On the other hand, if all the brands we have and develop in the future are reflections of what we stand for, then trust and resulting brand equity, increases.
RR: If an organization begins to migrate to Vivo, your institute’s operating system, is a brand review going to be necessary?
LA: It will be inevitable. Once the organization understands its identity down to its very bedrock, it will be eager to review everything it does through that lens, in order to gain greater speed, agility and overall coherence. It would be almost impossible not to review all of our brands and assess whether in their current state they reflect who the organization truly is and how it is driven to create value. And when and if disconnects are seen, some of our brands are going to need to evolve or even be let go. The guidance for which actions we should take will be based on our understanding of our identity.
But the most important change for any organization shifting to identity- based management is that new products and services are now much more likely to reflect how we create distinctive value — so what we might have believed were huge challenges in the past, such as differentiation, or customer segmentation, or even a sense of who our competition really is, will become clearer and in many instances, easier to meet.