Building capability at Apple

An article in yesterday’s Sunday Times “Rot sets in at Apple’s core” by Simon Duke caught my eye as it identified a number of classic challenges in making complex organizations successful and sustainable.

The article focuses on how the perception of Apple’s success has started to change, and that competition, lower profits and management confusion have taken £155 billion off the company’s value recently.

To be honest it’s unlikely that Apple itself has changed fundamentally in such a short period, but it is clear that sentiment has. Steve Jobs has already cemented his legacy as an innovator and visionary, but the test of his legacy in creating a great sustainable organization will play out over the next years.

Jobs was famous and celebrated for his attention to detail and micromanagement. He famously decided on every detail, including the type of glass to be used in the retail stores. Whilst this clearly led to fabulous products, I am not sure I would have relished the working environment: it’s a fine line between quality standards and micromanagement. If all decisions have to be escalated for senior management approval we potentially create bottlenecks and a disempowered management population.

The article quotes a telecoms executive who spends hundreds of millions of pounds a year, who said that since Jobs left decision-making had become more chaotic and confused.

Perhaps Apple has suffered from too much leadership at the top and too little in the middle. This is a common challenge as organizations become more complex and reach a certain scale. Success can make you slow!

Successful organizations grow and as they grow they become complex: they work internationally and develop increasingly complex products and organization structures. Teams and decision-making units become larger and more diverse and all this can introduce delay, cost and dissatisfaction.

If the response to complexity is always to escalate decisions, or if people feel that their decisions will be second-guessed, even by a brilliant CEO, then we train them not to make decisions for themselves. That’s why brilliant, driven, detail oriented executives are not always the best for their organization. They may achieve great short term results, but do they create a management machine that is capable of outlasting them?

Successful complex organizations of Apple’s size are, in reality, “led from the middle”, middle management is where the daily dilemmas and trade-offs are made, and your strategy is defined by what these people actually do rather than what you communicate to the analysts.

People in the middle of large organizations have to cope with complex situations and goals that compete for their time and attention. We need to give them the information, authority and confidence to make decisions, or they will have no alternative but to escalate  – and this makes organizations very slow and chaotic. Senior leaders don’t have the time – and usually the capability – to make decisions for a global organization – unless they can somehow be available 24 hours a day, seven days a week and have better information than their people on local priorities and challenges. If they are in this position then they have probably failed to recruit good people below them. If they have good people and aren’t empowering them then they are wasting resource and probably demotivating their people.

Building a sustainable world class organization isn’t just about having a smart CEO (though that obviously helps). It’s about building capability throughout the organization and particularly in middle management.

This is a critical phase in Apple’s development. It’s hard to know as an outsider how much is reality and how much is market and press perception. That sentiment has changed may be an indication that something has changed within Apple, but it could also be a reinterpretation of an unchanged Apple due to greater competition and an inevitable slowing in growth rates as the organization becomes huge.

Either way, Apple will need to continue to develop the capability of its people to work in an increasingly complex environment. It sounds like they need to clarify decision making processes and –  in the face of greater competition – will probably need to achieve a more balanced, less controlling relationship with their key customers. How well they do this will help define whether they remain one of the world’s most valuable organizations.