Culture Beginnings Through Founder/Leader Actions: Ken Olsen/DEC

The culture of DEC has been described in detail in Chapter Three. In this section, I want to focus more specifically on how DEC’s founder, Ken Olsen, created a management system that led eventually to the culture I described in that chapter. Olsen developed his beliefs, attitudes, and values in a strong Protestant family and at MIT, where he worked on Whirlwind, the first interactive computer. He and a colleague founded DEC in the mid-1950s because they believed they could build small interactive com­puters for which there would eventually be a very large market. They were able to convince General Doriot, then head of American Research and Development Corp., to make an initial investment because of their own credibility and the clarity of their basic vision of the company’s core mis­sion. After some years, the two founders discovered that they did not share a vision of how to build an organization, so Olsen became the CEO.

Olsen’s assumptions about the nature of the world and how a person discovers truth and solves problems were very strong at this stage of DEC ’s growth and were reflected in his management style. He believed that good ideas could come from anyone regardless of rank or background, but that neither he nor any other individual was smart enough to determine whether a given idea was correct. Olsen felt that open discussion and debate in a group was the only way to test ideas and that no one should take action until the idea had survived the crucible of an active debate. An individual might have intuitions, but he or she should not act on them until they had been tested in the intellectual marketplace. Hence, Olsen set up a number of committees and internal boards to ensure that all ideas were discussed and debated before they were acted on.

Olsen bolstered his assumptions with a story that he told frequently to justify his thrusting issues onto groups. He said that he would often refuse to make a decision because, “I’m not that smart; if I really knew what to do I would say so. But when I get into a group of smart people and listen to them debate the idea, I get smart very fast.” For Ken Olsen, groups were a kind of extension of his own intelligence, and he often used them to think out loud and get his own ideas straight in his head.

Olsen also believed that ideas cannot be implemented well if people do not fully support them and that the best way to get support is to let people debate the issues and convince themselves. He often told the story, “I remember making a decision once; I was walking down that road and turned around, only to discover that there was no one else there.” Therefore, on any important decision, Olsen insisted on a wide debate, with many group meetings to test the idea and sell it down the organization and laterally. Only when it appeared that everyone wanted to do it and fully understood it would he “ratify” it. He even delayed important decisions if others were not on board, though he was personally already convinced of the course of action to take. He said that he did not want to be out there leading all by himself and run the risk that the troops were not committed and might disown the decision if it did not work out.

Olsen’s theory was that a person must be given clear and simple indi­vidual responsibility and then be measured strictly on that area of respon­sibility. Groups could help to make decisions and obtain commitment, but they could not under any circumstances be responsible or accountable. The intellectual testing of ideas, which he encouraged among individuals in group settings, was extended to organizational units if it was not clear which products or markets should be pursued. He was willing to create overlapping product and market units and to let them compete with each other—not realizing, however, that such internal competition eventually undermined openness of communication and made it more difficult for groups to negotiate decisions.

Recognizing that circumstances might change the outcome of even the best-laid plans, Olsen expected his managers to renegotiate those plans as soon as they observed a deviation. Thus, for example, if an annual budget had been set at a certain level, and the responsible manager noticed after six months that he would overrun it, he was expected to get the situation under control according to the original assumptions or to come back to senior management to renegotiate. It was absolutely unacceptable either not to know what was happening or to let it happen without informing senior management and renegotiating.

Olsen believed completely in open communications and the ability of people to reach reasonable decisions and make appropriate compromises if they openly confronted the problems and issues, figured out what they wanted to do, and were willing to argue for their solution and honor any commitments they made. He assumed that people have “constructive intent,” a rational loyalty to organizational goals, and shared commitments. Withholding information, playing power games, competitively trying to win out over another member of the organization on a personal level, blam­ing others for your own failures, undermining or sabotaging decisions you have agreed to, and going off on your own without getting others ’ agree­ment were all defined as sins and brought public censure.

This “model” of how to run an organization to maximize individual cre­ativity and decision quality worked very successfully in that the company experienced dramatic growth for more than thirty years and had exception­ally high morale. However, as the company grew larger, people found that they had less time to negotiate with each other and did not know each other as well personally, making these processes more frustrating. Some of the paradoxes and inconsistencies among the various assumptions came to the surface. For example, to encourage individuals to think for themselves and do what they believed to be the best course for DEC, even if it meant insubordination, clearly ran counter to the dictum to honor their commit­ments and support decisions that have been made. In practice, the rule of hon­oring commitments was superseded by the rule of doing only what the person believes is right, which meant that sometimes group decisions would not stick.

DEC had increasing difficulty in imposing any kind of discipline on its organizational processes. If a given manager decided that for organizational reasons a more disciplined autocratic approach was necessary, he or she ran the risk of Olsen’s displeasure because freedom was being taken away from subordinates and that would undermine their entrepreneurial spirit. Olsen felt he was giving his immediate subordinates great freedom, so why would they take it away from the levels below them? At the same time, Olsen recognized that at certain levels of the organization, discipline was essential to getting anything done; the difficulty was in deciding just which areas required discipline and which areas required freedom.

When the company was small and everyone knew everyone else, when “functional familiarity” was high, there was always time to renegotiate, and basic consensus and trust were high enough to ensure that if time pressure forced people to make their own decisions and to be insubordinate, others would, after the fact, mostly agree with the decisions that had been made locally. In other words, if initial decisions made at higher levels did not stick, this did not bother anyone—until the organization became larger and more complex. What was initially a highly adaptive system ideally suited for innovation began to be regarded by more and more members of the organization as disorganized, chaotic, and ill adapted to a more mature commodity market.

The company thrived on intelligent, assertive, individualistic people who were willing and able to argue for and sell their ideas. The hiring practices of the company reflected this bias in that each new applicant had to be approved by a large number of interviewers. So over the course of its first decade, the organization tended to hire and keep only those kinds of people who fit the assumptions and were willing to live in the system even though it might at times be frustrating. The people who were comfort­able in this environment and enjoyed the excitement of building a success­ful organization found themselves increasingly feeling like members of a family, and they were emotionally treated as such. Strong bonds of mutual support grew up at an interpersonal level, and Ken Olsen functioned sym­bolically as a brilliant, demanding, but supportive and charismatic father figure.

Ken Olsen is an example of an entrepreneur with a clear set of assump­tions about how things should be, both at the level of how to relate exter­nally to the environment and how to arrange things internally in the organization. His willingness to be open about his theory and his rewarding and punishing behavior in support of it led both to the selection of others who shared the theory and to strong socialization practices that reinforced and perpetuated it. Consequently, the founder’s assumptions were reflected in how the organization operated well into the 1990s. DEC’s economic col­lapse and eventual sale to Compaq in the late 1990s also illustrates how a set of assumptions that works under one set of circumstances may become dysfunctional under other sets of circumstances.

Source: Schein Edgar H. (2010), Organizational Culture and Leadership, Jossey-Bass; 4^th edition.