Most decisions in organizations are made by escalating them up the management hierarchy — and it’s usually the highest paid person in the room’s opinion (“HIPPO”) that prevails. The HIPPO model of decision-making will likely always be with us. But with the rise of digital technology, and with it the ability to get immediate feedback from customers and communities, crowdsourcing has become a powerful alternative for driving important decisions. The challenge is finding the right ways to introduce crowdsourcing into your management processes so that it opens up and democratizes decisions, harvesting the accumulated thoughts and perspectives from your customers and across your organization — but without bogging things down.
Consider these three examples from the frontiers of management:
Funding decisions at most organizations are made by senior management or maybe an independent panel. “Crowdfunding” relies instead on “the crowd” to make decisions by soliciting contributions from a large group of people, usually an online community of volunteers. Kickstarter is one of a growing number of crowdfunding platforms for gathering money from the public to fund all sorts of projects.
IBM saw these online social systems for investing in new ventures and decided they would like to develop a similar system internally for selecting innovative projects. In January 2013 they created “IBM iFundIT,” a program in which volunteers decide where to spend seed money using an intranet site for proposing ideas, commenting, volunteering, and funding. Instead of the typical process where technology projects are picked by a review board, people in IBM’s IT community can participate as submitters, backers, and evaluators. Employees submit their projects to a community and promote them through IBM’s Facebook-like internal social networks. Funding is raised over a period of eight weeks. 600 volunteer investors had up to $2,000 each to invest in the project(s) of their choice. Over 1,000 IBMers participated from 30 countries, applying to get part of the seed fund of $300,000. 160 projects were submitted and 20 reached their funding targets ($10,000-$30,000).
Given the success of the program in 2013, IBM’s CIO decided to invest $7 million to expand iFundIT in 2014. This expansion shows how social networking systems have begun to cross over from the consumer world to corporations to drive innovation. Not only does this approach give more control to employees, it results in innovative projects that are launched in a matter of weeks, not months.
New product development is traditionally approached by researching and developing new products in laboratories, take prototypes to customers for their reactions, and then go to production. Software companies have developed an alternative approach (“Agile” and “Scrum”) that uses rapid cycle testing of product features to see what customers like. Customers, instead of engineers or managers, make decisions on product designs in an ongoing dialogue.
For a number of years IBM has provided a forum to exchange new ideas for IT systems and apps: the “Technology Adoption Program” is a website where innovators can test their projects with early adopters and prove business value through adoption. Within the apps world it is almost impossible for smart managers to decide which app is a good idea in advance. A good idea is usually figured out after the fact, not before. (Who would have thought Candy Crushwould take off the way it did?) When it comes to new products and services, customers are the key to success. So rather than have managers look at product ideas and pick the best solution, IBM provides a Technology Adoption Platform for employees to put up new apps, and then they measure use and let the wisdom of crowds make decisions on what goes forward.
What you work on is decided by bosses in almost all companies. But not at Valve Software, creators of video games (Half-Life, Counter-Strike, Portal), a game engine, and online gaming platform. Founder and CEO Gabe Newell says, “In 1996, we set out to make great games, but we knew back then that we had to first create a…place where incredibly talented individuals are empowered to put their best work into the hands of millions of people, with very little in their way.” They’ve been boss-free since 1996. “We don’t have any management, and nobody ‘reports to’ anybody else,” says Valve’s handbook for new employees. Newbies aren’t told where to work. Instead, they are expected to decide on their own where they can contribute most. Most desks at Valve are on wheels, so after figuring out what they want to do, workers push their desks to the group they want to join. There are no titles. Reviews happen by peers, and structure emerges. It may sound crazy and extreme, but it’s a useful benchmark question to ask the next time you’re stuck in a bureaucratic argument between functional silos: “What if we all had a shared objective to do the right thing for the customer?” In this case, though, the crowd is the community of employees, and the approach is about empowering workers, increasing speed, and eliminating waste.
In a world where continuous innovation is increasingly critical and organizations must move at the pace of software companies, competitive success — perhaps even survival — requires moving beyond exclusive use of hierarchical decision-making, drawing on the power of crowdsourcing and markets wherever possible. As my colleague Steve Stanton observed, “The combination of multiple perspectives offers a wider set of possibilities than simple seniority. Of course crowds can be wrong, or turn into thoughtless mobs, but if the process is designed carefully, with the right checkpoints and safeguards in place, crowdsourcing can bring fresh insights for wider consideration.” These examples show just a few ways your management processes (e.g., planning, budgeting, recruiting, and training) could be reengineered.
This revolution in decision-making processes will challenge conventional management approaches and shift power from your current leaders to employees and customers. It will surely meet resistance. The critical question is, will today’s leaders be willing to give more say to employees and customers, as IBM and Valve have? It will take trust in the cumulative wisdom of your customers and employees. For many organizations, this may take a long time, but for some, the revolution is already underway.
This post first appeared on the Harvard Business Review and has been lightly edited.