turning goals into results: the power of catalytic...

Turning Goals into Results:The Power of CatalyticMechanisms

by Jim Collins

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ost executives have a big,hairy, audacious goal. One dreams of making his brand morepopular than Coke; another aspires to create the most lucra-tive Web site in cyberspace; yet another longs to see her orga-nization act with the guts necessary to depose its arch rival.So, too, most executives ardently hope that their outsizedgoals will become a reality. To that end, they write visionstatements, deliver speeches, and launch change initiatives.They devise complicated incentive programs, formalize rulesand checklists, and pen policies and procedures. In otherwords, with the best intentions, they create layer upon layerof stultifying bureaucracy. Is it any surprise that their wildlyambitious dreams are seldom realized?

But companies don’t have to act that way. Over the past sixyears, I have observed and studied a simple yet extremely

artwork by craig frazier Copyright © 1999 by the President and Fellows of Harvard College. All rights reserved.

If you need help transforming your organization's

wildest dreams into reality, introduce a

new managerial device that's as

simple as it is effective.

by Jim Collins

Jim Collins operates a management research laboratory in Boulder, Col-orado. He is the coauthor, with Jerry I. Porras, of Built to Last: SuccessfulHabits of Visionary Companies (HarperBusiness, 1994) and of “BuildingYour Company’s Vision” (HBR September–October 1996).

M

TURNING GOALS

INTO RESULTS: The Power

of Catalytic Mechanisms

powerful managerial tool that helps organizationsturn goals into results. I have recently codified it; Icall it the catalytic mechanism. Catalytic mecha-nisms are the crucial link between objectives andperformance; they are a galvanizing, nonbureau-cratic means to turn one into the other. Put anotherway, catalytic mechanisms are to visions what thecentral elements of the U.S. Constitution are to theDeclaration of Independence – devices that trans-late lofty aspirations into concrete reality. Theymake big, hairy, audacious goals reachable.

My research indicates that few companies – per-haps only 5% or 10% – currently employ catalyticmechanisms, and some of them aren’t even awarethat they do. I have also found that catalytic mecha-nisms are relatively easy to create and implement.Given their effectiveness, they are perhaps themost underutilized – and most promising – devicesthat executives can use to achieve their big, hairy,audacious goals, or BHAGs. (For more on BHAGs,see the insert “Anatomy of a BHAG.”)

Consider Granite Rock, a 99-year-old company inWatsonville, California, that sells crushed gravel,concrete, sand, and asphalt. Twelve years ago, whenbrothers Bruce and Steve Woolpert became copresi-dents, they gave their company a new BHAG. Gran-ite Rock would provide total customer satisfactionand achieve a reputation for service that met or ex-ceeded that of Nordstrom, the upscale departmentstore that is world famous for delighting its cus-tomers. Not exactly a timid goal for a stodgy, family-owned company whose employees are mostly tough,sweaty people operating rock quarries and whosecustomers – mainly tough, sweaty constructionworkers and contractors –are not easily dazzled.

Now stop and think for a minute: What would ittake to actually reach such an ambitious goal? Mostpeople automatically think of galvanizing leader-ship. But that wasn’t an option for Granite Rock, asthe Woolperts are a quiet, thoughtful, and bookishclan. Nor did the answer lie in hosting hooplaevents or launching grand customer service initia-

72 harvard business review July–August 1999

the power of catalytic mechanisms

In our research for Built to Last, Jerry Porras and I dis-covered that most enduring great companies set andpursue BHAGs (pronounced BEE-hags and shorthandfor big, hairy, audacious goals). There are three keycharacteristics of a good BHAG:

1. It has a long time frame – ten to 30 years or more.The whole point of a BHAG is to stimulate your orga-nization to make changes that dramatically improveits fundamental capabilities over the long run. Citi-corp’s first BHAG, set in 1915 – to become the mostpowerful, the most serviceable, the most far-reachingworld financial institution ever – took more than fivedecades to achieve. Its new BHAG, set in the early1990s – to attain 1 billion customers worldwide – willrequire at least two decades to achieve. (Today it hasless than 100 million.) BHAGs with short time framescan lead executives to sacrifice long-term results forthe sake of achieving a short-term goal.

2. It is clear, compelling, and easy to grasp. The goalin a good BHAG is obvious, no matter how you phraseit. For example, Philip Morris’s BHAG, set in the1950s – to knock off R.J. Reynolds as the number onetobacco company in the world – didn’t leave muchroom for confusion. I call this the “Mount Evereststandard.” The goal to climb Mount Everest can besaid as “Climb the most famous mountain in theworld” or “Climb the biggest mountain in the world”

or “Climb the mountain at 87 degrees east, 28 degreesnorth” or “Climb the mountain in Nepal that mea-sures 29,028 feet” or hundreds of other ways. If youfind yourself spending countless hours tinkering witha statement, you don’t yet have a BHAG.

3. It connects to the core values and purpose of theorganization. The best BHAGs aren’t random; they fitwith the fundamental core values and reason for beingof the company. For example, Nike’s BHAG in the1960s – to crush Adidas –fit perfectly with Nike’s corepurpose “to experience the emotion of competition,winning, and crushing competitors.” Sony’s BHAG inthe 1950s – to become the company most known forchanging the worldwide poor-quality image of Japa-nese products – flowed directly from its stated corevalue of elevating the Japanese culture and nationalstatus.

This last criterion connects back to the reason forhaving a BHAG in the first place. It is a powerful wayto stimulate progress – change, improvement, innova-tion, renewal – while simultaneously preserving yourcore values and purpose. It is this remarkable ability toblend continuity with change that separates enduringgreat companies from merely successful ones. Thetrick, of course, is not just to set a BHAG but toachieve it, and therein lies the power of catalyticmechanisms.

Anatomy of a BHAG

tives. The brothers had seen such efforts at othercompanies and believed they had little lasting effect.

They chose instead to implement a radical newpolicy called “short pay.” The bottom of everyGranite Rock invoice reads, “If you are not satisfiedfor any reason, don’t pay us for it. Simply scratchout the line item, write a brief note about the prob-lem, and return a copy of this invoice along withyour check for the balance.”

Let me be clear about short pay. It is not a refundpolicy. Customers do not need to return the prod-uct. They do not need to call and complain. Theyhave complete discretionary power to decidewhether and how much to pay based on their satis-faction level.

To put the radical nature of short pay in perspec-tive, imagine paying for airline tickets after theflight and having the power to short pay dependingon your travel experience – not just in the air, butduring ticketing and deplaning as well. Or supposeuniversities issued tuition invoices at the end of thesemester, along with the statement, “If you are notsatisfied with the dedication of the professor in anycourse, simply scratch out that course and send us a tuition check for the balance.” Or suppose yourcell phone bill came with a statement that said, “Ifyou are not satisfied with the quality of connec-tion of any calls, simply identify anddeduct those from the total and send acheck for the balance.”

In the years since it was insti-tuted, short pay has had a pro-found and positive impact onGranite Rock. It serves as awarning system, providinghard-to-ignore feedback aboutthe quality of service and prod-ucts. It impels managers to re-lentlessly track down the rootcauses of problems in order to pre-vent repeated short payments. Itsignals to employees and customersalike that Granite Rock is dead seriousabout customer satisfaction in a way that goesfar beyond slogans. Finally, it keeps Granite Rockfrom basking in the glory of its remarkable success.

And it has had success, as has been widely reported.The little company – it has only 610 employees –has consistently gained market share in a commod-ity business dominated by behemoths, all the whilecharging a 6% price premium. It won the presti-gious Malcolm Baldrige National Quality Award in1992. And its financial performance has signifi-cantly improved – from razor-thin margins to profitratios that rival companies like Hewlett-Packard,

which has a pretax return of roughly 10%. Nodoubt, short pay was a critical device for turningthe Woolpert brothers’ BHAG into a reality.

Five Parts of a WholeObviously, not every company should instituteshort pay. Rather, companies should have catalyticmechanisms as powerful as short pay. What, then,is the difference between a catalytic mechanismand most traditional managerial devices, such as acompany’s hiring and compensation policies? Cat-alytic mechanisms share five distinct characteris-tics. (See the chart “Catalytic Mechanisms: Break-ing from Tradition.”) Let’s look at them in turn.

Characteristic 1: A catalytic mechanism pro-duces desired results in unpredictable ways. Whenexecutives identify a bold organizational goal, thefirst thing they usually do is design a plethora ofsystems, controls, procedures, and practices thatseem likely to make it happen. That process iscalled alignment, and it’s wildly popular in theworld of management, among business academicsand executives alike. After all, alignment makessense. If you want to make your brand more popularthan Coke, you had better measure the effective-

ness of advertising and reward successful mar-keting managers with big bonuses. But

the problem, as I’ve said, is that thecontrols that undergird alignment

also create bureaucracy, and itshould be news to no one thatbureaucracy does not breed ex-traordinary results.

Don’t get me wrong. Bureau-cracy may deliver results, butthey will be mediocre becausebureaucracy leads to predict-

ability and conformity. Historyshows us that organizations

achieve greatness when people areallowed to do unexpected things – to

show initiative and creativity, to stepoutside the scripted path. That is when delight-

ful, interesting, and amazing results occur. Take 3M. For decades, its executives have

dreamed of having a constant flow of terrific newproducts. To achieve that end, in 1956, the companyinstituted a catalytic mechanism that is by nowwell known: scientists are urged to spend 15% oftheir time experimenting and inventing in the areaof their own choice. How very unbureaucratic! Noone is told what products to work on, just howmuch to work. And that loosening of controls hasled to a stream of profitable innovations, from the

harvard business review July–August 1999 73


Catalytic

mechanisms are

the most promising

devices executives can

use to achieve their big,

hairy, audacious

goals.

famous Post-it Notes to less well-known examplessuch as reflective license plates and machines thatreplace the functions of the human heart duringsurgery. 3M’s sales and earnings have increasedmore than 40-fold since instituting the 15% rule.The mechanism has helped generate cumulativestock returns 36% in excess of the market and hasearned the company a frequent ranking in the topten of Fortune’s most-admired list.

In a happy coincidence, the variation sparked bycatalytic mechanisms forces learning to occur. Sup-pose you set out to climb the 3,000-foot sheer rockface of El Capitan in Yosemite Valley. Once youpass pitch 15, you cannot possibly retreat from yourparticular route: you are, by dint of nature, 100%committed. Although you can’t predict how youwill overcome the remaining pitches – you have toimprovise as you go – you can predict that you willinvent a way to the top. Why? Because the reality ofhaving no easy retreat forces you to reach the sum-mit. Catalytic mechanisms have the same effect.Granite Rock’s short pay commits the company toachieving complete customer satisfaction. Everytime a customer exercises short pay, Granite Rocklearns or invents a way to run its operations moreeffectively. Ultimately, such new knowledge leadsto better results, making the catalytic mechanismpart of a virtuous circle of variation, learning, im-provement, and enhanced results.

My “red flag” device also illustrates that circle.When I first began teaching Stanford M.B.A. stu-dents by the case method in 1988, I noticed that asmall number of them tended to dominate the dis-cussion. I also noticed that there was no correlationbetween the degree of vocal aggressiveness and howmuch these students improved the class’s overalllearning experience. Some vocal students hadmuch to contribute; others just liked to hear them-selves talk. Worse, I noticed when chatting withstudents after class that some of the quieter indi-viduals had significant contributions but were se-lective or shy about sharing them. Furthermore,seeing 15 to 20 hands raised at a time, I had no wayof knowing which one represented a truly signifi-cant insight, and I sensed that I was frequentlymissing some students’ one best contribution forthe entire quarter.

I solved that problem by giving each student an8.5 inch by 11 inch bright red sheet of paper at thebeginning of every quarter. It had the following in-structions: “This is your red flag for the quarter. Ifyou raise your hand with your red flag, the class-room will stop for you. There are no restrictions onwhen and how to use your red flag; the decision restsentirely in your hands. You can use it to voice an

observation, share a personal experience, present ananalysis, disagree with the professor, challenge aCEO guest, respond to a fellow student, ask a ques-tion, make a suggestion, or whatever. There will beno penalty whatsoever for any use of a red flag. Yourred flag can be used only once during the quarter.Your red flag is nontransferable; you cannot give orsell it to another student.”

I had no idea precisely what would happen eachday in class. And yet, the red flag device quicklycreated a better learning experience for everyone. Inone case, it allowed a very thoughtful and quiet stu-dent from India to challenge Anita Roddick on theBody Shop’s manufacturing practices in the ThirdWorld. Roddick, a charismatic CEO with ferociouslyheld views, usually dominates any discussion. Thered flag forced her to listen to a critic. The spiritedinterchange between these two passionate andwell-informed people produced more learning thananything I could have scripted. Without the redflag, we would have just had another session of “I’mCEO and let me tell you how it is.”

In another situation, a student used her red flag to state, “Professor Collins, I think you are doing a particularly ineffective job of running class today.You are leading too much with your questions andstifling our independent thinking. Let us think forourselves.” That was a tough moment for me. MyBHAG as a professor was to create the most popularclass at the business school while imposing thehighest workload and the stiffest daily standards.The red flag system confronted me with the factthat my own questioning style stood in the way ofmy dream – but it also pointed the way to improve-ment, again, to everyone’s benefit.

Interestingly, no other professors on campusadopted the red flag. One of them told me, “I can’timagine doing that. I mean, you never know whatmight happen. I could never give up that much con-trol in my classroom.” What he and others missedwas a great paradox: by giving up control and de-creasing predictability, you increase the probabilityof attaining extraordinary results.

Characteristic 2: A catalytic mechanism distrib-utes power for the benefit of the overall system, oftento the great discomfort of those who traditionallyhold power. With enough power, executives can always get people to jump through hoops. If it iscustomer service they are after, for instance, theycan threaten dismissal to coerce salespeople tosmile and act friendly. If they seek higher profits perstore, they can pay employees according to flow-through. And if increased market share is thedream, they can promote only those managers whomake it happen.



But consider how catalytic mechanisms work.Short pay distributes power to the customer, to thegreat discomfort of Granite Rock’s executives, buttoward the greater goal of continuous improvementfor the benefit of customers and company alike.The red flag distributes power to the students, tothe great discomfort of the teacher, but to the ulti-mate improvement of learning in general. Thefounders of the United States understood this pointwhen they wrote the Constitution. After all, theConstitution is the set of catalytic mechanismsthat reinforce and support the national vision. Vot-

ing, the system of checks and balances, the two-thirds vote to amend, the impeachment process –these disperse power away from one central source,to the great discomfort of those who seek power,but to the benefit of the overall nation.

Catalytic mechanisms force the right things tohappen even though those in power often have avested interest in the right things not happening.Or they have a vested interest in inertia – lettingpointless, expensive practices stay in place. That’swhat happened for years, perhaps decades, at U.S.Marine recruit depots. All recruits are issued a uni-



Catalytic Mechanisms: Breaking from Tradition

A traditional managerial device,control, or mechanism…

reduces variation as it enlargesthe organization’s bureaucracy.

concentrates power in thehands of authorities who canforce people to obey theircommands.

is understood by employeesand executives alike as merelyan intention.

attempts to stimulate the rightbehaviors from the wrongpeople.

has the short-lived impact of asingle event or a fad.

A catalytic mechanism…

produces desired results inunpredictable ways.

distributes power for thebenefit of the overall system,often to the great discomfortof those who traditionally holdpower.

has a sharp set of teeth.

attracts the right people andejects viruses.

produces an ongoing effect.

Examples of catalytic mechanisms

The red flag made a ferociouslyopinionated CEO listen to thechallenge of an M.B.A. student –improving the knowledge of thewhole class, despite theunexpected nature of theexchange.

A new government rule allowed alow-level manager to expunge animmensely wasteful regulationthat required nearly new uniformsto be burned.

Short pay at Granite Rock allowscustomers to pay only for theproducts that satisfy them.

At W.L. Gore & Associates,employees can, in effect, fire theirbosses, ensuring nonhierarchicalleadership.

Kimberly-Clark knowingly put itselfinto head-to-head competitionwith Procter & Gamble to impelbetter performance in theconsumer goods marketplace.Such a strategy is still working 30years later.

Catalytic mechanisms share five distinct characteristics that distinguish them from traditional controls.

form on their first day. Two weeks later, they needanother – the pounds melt away when you run 12miles every dawn. The military’s rules requiredthose two-week-old uniforms to be destroyed. Notwashed and reissued, but destroyed.

In the early 1990s, Phil Archuleta, a materialsmanager at a recruiting depot in San Diego, suggestedthat they reuse the uniforms. His boss’s response:“No. It’s against regulations. Forget about it.” So in a fabulous act of insubordination, Archuletawashed the uniforms, hid them in boxes, and bidedhis time until he finally got a supervisor willing tochallenge the regulation.

In an effort to empower the Phil Archuletas of theworld, the government launched a wide-ranginginitiative in 1994 to fix its bureaucratic quagmire.A new rule regarding waivers was put in place, andit is a catalytic mechanism that exemplifies thebeauty and power of redistributing power. It hastwo primary components: n Waiver-of-regulation requests must be acted uponwithin 30 days. After 30 days, if no answer is forth-coming, the party asking for the waiver can assumeapproval and implement the waiver.n Those officials who have the authority to changeregulations can approve waiver requests, but onlythe head of an agency can deny a request.

Think for a minute about the impact of this cat-alytic mechanism. It subverts the default, knee-jerktendency of bureaucracies to choose inaction overaction, status quo over change, and idiotic rulesover common sense. Supervisors can no longer sayno or not respond. They would have to champion a no all the way to the head of their agency –the equivalent of the head commandantof the entire U.S. Marine Corps –within 30 days. Instead of having togo out of their way to demon-strate why it is a good idea, theywould have to expend great en-ergy to prove that it is a badidea. The catalytic mechanismtilts the balance of power awayfrom inertia and toward change.

Indeed, the primary effect ofthe new waiver rule – as with allcatalytic mechanisms – is to givepeople the freedom to do the rightthing. The waiver that allowed Archuletato change the regulation on uniforms createda savings of half a million dollars in two years. Sim-ilar examples of people doing the right thing withthe waiver rule abound throughout the federal gov-ernment, from the FDA to NASA. Tort claims ad-justers in the Department of Agriculture, for in-

stance, waived regulations to reduce processingtime of claims from 51 days to eight days – a man-power savings of 84%. When executives vest peoplewith power and responsibility and step out of theway, vast reservoirs of energy and competence flowforth. Again we have a paradox: the more execu-tives disperse power and responsibility, the morelikely the organization is to reach its big, hairy, au-dacious goal.

Characteristic 3: A catalytic mechanism hasteeth. Lots of companies dream of total customersatisfaction; few have a device for making it happenthat has the teeth of short pay. Plenty of organiza-tions state the lofty intention to empower people;few translate that into results with a mechanismthat has the teeth of the red flag. Many companiesstate that they intend to “become number one ornumber two in every competitive arena”; few haveadded an effective means of enforcement by saying,“and if the business is not number one or numbertwo, or on a clear trajectory to get there, we willexit within three months.”

The fact is, executives spend hours drafting, re-drafting, and redrafting yet again statements of corevalues, missions, and visions. This is often a veryuseful process, but a statement by itself will not ac-complish anything. By contrast, a catalytic mecha-nism puts a process in place that all but guaranteesthat the vision will be fulfilled. A catalytic mecha-nism has a sharp set of teeth.

Consider the case of Nucor Corporation, themost successful U.S. steel company of the last threedecades. It has a unique vision for a Rust Belt com-

pany: to be an organization whose workersand management share the common

goal of being the most efficient, high-quality steel operation in the

world, thereby creating job secu-rity and corporate prosperity inan industry ravaged by foreigncompetition. Behind that vi-sion lies the belief held deeplyby Nucor’s senior leaders thatdecent, hard-working people

should be well paid for their efforts and, so long as they are

highly productive, that they neednot worry about job security.

On the surface, Nucor’s vision maysound warm and fuzzy. Dig deeper, and you’ll

see that it actually leaves no room for unproductiveemployees. Nucor has created a culture of intenseproductivity whereby five people do the work thatten do at other steel companies, and get paid likeeight. The vision came to life through a series of



Catalytic

mechanisms

subvert the default

knee-jerk tendency

of bureaucracies to

choose status quo

over change.

powerful catalytic mechanisms with teeth, such asthe way frontline workers get paid: n Base hourly pay is 25% to 33% below the industryaverage.n People work in teams of 20 to 40; team-productiv-ity rankings are posted daily.n A bonus of 80% to 200% of base pay, based onteam productivity, is paid weekly to all teams thatmeet or exceed productivity goals.n If you are five minutes late, you lose your bonusfor the day.n If you are 30 minutes late, you lose your bonus forthe week.n If a machine breaks down, thereby stopping pro-duction, there is no compensating adjustment inthe bonus calculation.n If a product is returned for poor quality, bonus paydeclines accordingly.

You might be thinking that the Nucor system con-centrates power in the hands of management, whichwould seem to contradict the idea of dis-tributing power for the sake of the sys-tem. But in fact, the catalytic mecha-nism actually takes the power outof the hands of individual man-agers and their whims. Nucor hasno discretionary bonuses. It’smore like a sports bonus system:if you score so many points orwin a certain number of races,you get a bonus based on a prede-termined formula. Period. Thatformula gives workers more powerover their own destiny than bonusprograms that give large discretionarypower to management. If your team scores thepoints, your team gets the bonus, and no managercan take it away, citing, “We’re just not having avery good year” or “I don’t like your attitude.”

Nucor’s catalytic mechanisms for managers, in-cidentally, have even sharper teeth. Its executivecompensation system works very much like itsworker compensation system, except that the“team” is the entire plant (for plant managers) orthe entire company (for corporate officers). And,unlike most companies, when times are bad, Nu-cor’s executives assume greater pain than frontlineworkers: workers’ pay drops about 25%, plant man-agers’ pay drops about 40%, and corporate officers’pay drops about 60%. In the 1982 recession, CEOKen Iverson’s pay dropped 75%.

Characteristic 4: A catalytic mechanism ejectsviruses. A lot of traditional controls are designed toget employees to act the “right” way and do the“right” things, even if they are not so inclined. Cat-

alytic mechanisms, by contrast, help organizationsto get the right people in the first place, keep them,and eject those who do not share the company’score values.

Great organizations have figured something out.The old adage “People are your most important asset” is wrong; the right people are your most im-portant asset. The right people are those who wouldexhibit the desired behaviors anyway, as a naturalextension of their character and attitude, regardlessof any control and incentive system. The challengeis not to train all people to share your core values. The real challenge is to find people who alreadyshare your core values and to create catalytic mech-anisms that so strongly reinforce those values thatthe people who don’t share them either never gethired or, if they do, they self-eject.

Let’s return to the Nucor example. Nucor doesn’ttry to make lazy people productive. Its catalyticmechanisms create a high-performance environ-

ment in which those with an innate workethic thrive and free riders get out in a

hurry. Management usually doesn’tfire unproductive workers; workers

do. In one case, team memberschased a lazy coworker out of theplant. And one reporter writing astory on Nucor described show-ing up for a shift on time butthinking he was late because all

the workers had been there for 30minutes arranging their tools and

getting ready to fire off the startingline precisely at 7:00 a.m.

Interestingly, Nucor sets up its millsnot in traditional steel towns, but primarily

in rural, agricultural areas. The thinking is simple:you can’t teach the work ethic – either a person hasit or he doesn’t. But you can teach steel making.That’s why Nucor hires farmers and trains them.The company’s catalytic mechanisms wouldn’thave it any other way.

Another example of a catalytic mechanism eject-ing viruses comes from W.L. Gore & Associates, afabric company worth nearly $2 billion. Bill Gorefounded the company in 1958 with the vision ofcreating a culture of natural leadership. Leadership,in Gore’s view, could not be assigned or bestowedby hierarchical position. You are a leader if and onlyif people choose to follow you. Gore’s theory sprangnot just from his personal values but also from hisbusiness sense: he thought that the most creativeand productive work came when people freely madecommitments to one another, not when bosses toldthem what to do.



The old adage

“People are your

most important

asset” is wrong. The

right people are your

most important

asset.

To turn his vision into reality, Gore invented acatalytic mechanism that attracted the right peoplelike a magnet and scared away the others. At W.L.Gore & Associates, employees have the authorityto fire their bosses. Now, they can’t fire the personfrom the company but, if they feel their boss isn’tleading them effectively, they can simply bypasshim or her and follow a different leader.

Who would want to work at such a company? Exactly the people who belong there – people whoknow they can lead without the crutch of a formalposition or title and who believe in the philosophyof nonhierarchical leadership. Who would avoid itlike the plague? Anyone who gets giddy pulling thelevers of position and power just for the pulling’ssake. And if you’re a hierarchical leader who hap-pens to make it through the company’s door butcan’t quickly shake the notion that “the boss has tobe the boss,” it won’t take you long to find the exit.

Characteristic 5: A catalytic mechanism producesan ongoing effect. Catalytic mechanisms differ fun-damentally from catalytic events. A rousing speechto the troops, an electrifying off-site meeting, a euphoria-producing new buzzword, a new initiativeor strategic imperative, an impending crisis – all ofthese are catalytic events, and some are useful. Butthey do not produce the persistent, ongoing effect ofcatalytic mechanisms. In fact, a good catalytic mech-anism, as long as it evolves, can last for decades, asthe 15% rule at 3M and the impeachment mecha-nism in the Constitution illustrate.

The lack of catalytic mechanisms is one reasonmany organizations rally in a crisis but languishonce the crisis has passed. Leaders who feign acrisis – those who create a burning platform with-out simultaneously building catalytic mechanisms –do more long-term harm than good by creating asyndrome of crisis addiction. Executives who relyonly on catalytic events are left wondering why themomentum stalls after the first phase of euphoria,excitement, or fear has passed. To produce lastingresults, they must shift from orchestrating a seriesof events to building catalytic mechanisms.

Take, for example, the decades of ineffectual at-tempts to reform public education in the UnitedStates. Part of the failure lies in the approach to re-form; too often it is based on onetime events andfashionable buzzwords rather than on catalyticmechanisms that produce sustained effects. AsRoger Briggs, a high school teacher in Boulder, Col-orado, wrote in an essay on school reform: “Everyyear we get a new program or fad. And they neverreally work. And we teachers eventually just learnto ignore them, smile, and go about our business ofteaching.”

Now take a look at what happened when thestate of Texas started using a catalytic mechanismin 1995: comparison-band ranking of schools,which is directly tied to resource allocation and, insome cases, school closures. The ongoing effect ofthis device forced the momentum of reform for-ward. Why? Well, if you rank fifth out of 40 schoolsbut you just sit still, you’ll drop in the ratings. Sitstill long enough, and you’ll eventually rank 35thrather than fifth, and you may face closure. Becauseevery school is ranked on the same criteria, the barfor performance keeps rising. Within four years ofinstalling the mechanism, student achievement inTexas improved across the board. The percentage ofstudents who passed the Texas math skill exam, forexample, rose from roughly half to 80%, and theshare of black and Hispanic students who passeddoubled to 64% and 72%, respectively.

And consider the ongoing impact of a good cat-alytic mechanism in a more corporate setting. Dar-win Smith, former CEO of Kimberly-Clark, createdin 1971 the BHAG to transform Kimberly-Clarkfrom a mediocre forest- and paper-products com-pany into a world-class consumer goods company.At the time, Wall Street analysts scoffed at the idea,as did most of Kimberly-Clark’s competitors. Smithwas undeterred. He created one catalytic event andone equally important catalytic mechanism. Forthe first, he sold a big chunk of the company’s tradi-tional paper-production mills, thus leaving no easyescape route from the dream. For the second, hecommitted the company to head-to-head competi-tion with the best consumer-products company inthe world: Procter & Gamble. With its entry into dis-posable diapers, Kimberly-Clark would henceforthbe a direct rival of P&G. Kimberly-Clark would ei-ther become excellent at consumer products or getcrushed. The beauty of this catalytic mechanism isthat, unlike the “change or die” ranting all too com-mon among modern executives, its ongoing effect isas powerful today as when it was first put in placenearly 30 years ago.

Getting StartedThis is not intended to be a how-to article; my mainobjective has been to introduce the concept of cat-alytic mechanisms and demonstrate how they havehelped some companies – and individuals – turntheir BHAGs into reality. (For more on the personaluse of catalytic mechanisms, see the insert “Not forCompanies Only.”) Nonetheless, my research sug-gests that there are a few general principles thatsupport the process of building catalytic mecha-nisms effectively.





Don’t just add, remove. When pursuing BHAGs,our natural inclination is to add – new initiatives,new systems, new strategies, new priorities, andnow, new catalytic mechanisms. But in doing so,we overwhelm ourselves. Isn’t it frightening thatthe new version of the Palm Pilot has space for1,500 items on its to-do list? Sadly, few of us have a“stop doing” list. We should, because to take some-thing away – to unplug it – can be as catalytic asadding something new.

Take the case of a circuit division at Hewlett-Packard. It had tried countless programs and initia-tives to reach its BHAG of becoming “a placewhere people would walk on the balls of their feet,feel exhilarated about their work, and search forimaginative ways to improve and innovateeverything we do.” The events producedshort-term results – a moment ofsparkle and excitement – but with-in a month or two, the division al-ways drifted back into its sleepy,humdrum mode.

Then its executives consid-ered the question, “What poli-cies should we remove?” Formost of its history, the divisionhad comfortably lived off a cap-tive internal market. What if HP’sdivisions were allowed to buy theircomponents from outside competi-tors? Never again would the circuit di-vision have fat internal orders just handed to it. Never again could it just sit still. Two months,four months, a year, five years, and ten years downthe road – fierce competitors would still be there,constantly upping the ante. The prospect was bothterrifying and exhilarating. Managers decided tounplug the “buy internal” requirement and openthe doors to free-market competition.

Within weeks, the circuit division was well on itsway to realizing its BHAG. You could sense a com-pletely different environment the moment youwalked in the door. The place hummed with activ-ity, and its performance showed it.

Create, don’t copy. Creating mechanisms is ex-actly that: a creative act. You can, of course, getgood ideas by looking at what other organizationsdo, but the best catalytic mechanisms are idiosyn-cratic adaptations, if not wholesale creations, for aunique situation.

Because catalytic mechanisms require freshideas, it makes sense to invite all members of an organization to participate in their creation. Every-one. Certainly, some mechanisms require inputfrom senior executives, like short pay at Granite

Rock. Yet many of the best catalytic mechanismswere not created by top management. The idea forthe federal government’s waiver rule, for example,originated with two staff members –Lance Cope andJeff Goldstein. They were working in the nationalreinvention labs, and neither had direct authorityover any federal agency.

Allow me also to use a personal example. Part ofmy professional vision is to contribute throughteaching and to harness my curiosity and passionfor learning in ways that make a positive impact onthe world. From that goal flows the imperative thatI allocate time primarily to research, writing, andteaching and limit consulting work only to thosesituations in which I can contribute as a teacher.

To reinforce that imperative, I have createdtwo catalytic mechanisms: the “come to

Boulder rule” and the “four day rule.”The first rule states that I will not

engage in a direct advisory rela-tionship with any organizationunless the chief executiveagrees to travel to my Boulderresearch laboratory. Executivesspend huge sums of money onconsultants, but money doesn’t

equal commitment – if you havea big enough budget, invoices just

don’t hurt. Yet all chief executives,no matter how large their budgets,

have only 24 hours in a day. If a CEOflies all the way to Boulder, he or she has

demonstrated commitment to serious discussionsand hard work, and the likelihood that I will make a significant impact as a teacher increases expo-nentially. Most important, those not committed toreal (and perhaps uncomfortable) change eject rightup front.

The second mechanism – my four-day rule –states that any given organization has an upper limit of four days of my advisory time in a year. Themost lasting impact comes by teaching people howto fish, not by fishing for them. Organizations thatwant an adviser to fish for them self-eject throughthis catalytic mechanism. Admittedly, these arehighly unusual devices, and they would be disas-trous for most consulting firms that depend on con-tinuous growth to feed their machine. Yet they areperfectly designed for a strategy aimed at explicitlynot building a large consulting business. They areunique to me, as all catalytic mechanisms shouldbe to their creators.

Use money, but not only money. The examples inthis article may lead you to believe that most cat-alytic mechanisms use money. But, in fact, when

A catalytic

mechanism should

be an idiosyncratic

adaptation, if not a

wholesale creation,

for a unique

situation.



Not for Companies Only

My research has focused on the impact of catalyticmechanisms in organizational settings –on how theycan turn a company’s most ambitious goals into real-ity. But catalytic mechanisms can also have a power-ful impact on individuals. Indeed, I have made cat-alytic mechanisms a fundamental part of how Imanage my time, with my “come to Boulder rule”and “four day rule.”

I am not alone. Several of my former students atStanford Business School have applied a catalyticmechanism to reach their goals. In one case, a stu-dent emerged from his courses on entrepreneurshipfired up by the idea of forgoing the traditional pathand striking out on his own. But as time passed andhe felt the crushing burden of school debt as well asthe lure of lucrative job offers, his personal visionwaned. He took a job at a large, established disc drivemanufacturer and promised himself, “I’m going tolaunch out on my own in five years when I’ve paid offall my school debts.”

In most cases, such dreams fade as the years go by –with the advent of cars, houses, children, and all therest. My former student, however, implemented aninteresting catalytic mechanism to keep his visionalive. He drafted a resignation letter and dated it fiveyears out. Then he gave copies of the letter to a hand-ful of reliable people, along with the following in-structions, “If I don’t leave my job and launch out on my own by the specified date, then send the letterin for me.” His plan worked. In 1996, I received an e-mail from him that described how he saved hismoney and spent his off-hours developing his entre-preneurial options. Then, right on schedule, he quithis secure job and launched a fund to buy and run hisown company.

In another case, a former student created a personalboard of directors composed of people he admires and would not want to disappoint, and he made a per-sonal commitment to follow the board’s guidance –it has power in his life. In 1996, he wrote me: “I re-cently used my personal board in deciding whetherto leave Morgan Stanley and go to work with a friendin his two-year-old business. ‘Yes’ was the unani-mous vote.” So despite the risk of leaving a lucrativeand prestigious position, he leapt into the small com-pany, which has since grown fourfold to employmore than 80 people.

Consider also the highly effective catalytic mecha-nism that a colleague of mine has been using for thepast three years to attain her BHAG: to lead a full andactive life as a mother, wife, professional writer, andchurch volunteer, without going crazy. That partabout maintaining sanity is important because be-fore her catalytic mechanism was in place, my col-league constantly found herself overextended andmiserable. The main culprit was her work as a free-lance writer: she accepted too many jobs. “Even if we didn’t need the money, I would still take on everyproject that came my way,” she recalls. “Maybe be-cause my family was so poor when I was growing up,I just found it impossible to leave money on thetable.” Not surprisingly, the woman’s children paidthe price of her constant working, as did her husbandand close-knit extended family. “Either I was too ex-hausted to see people or else I was calling them for ababy-sitting favor,” she says.

One day, my colleague was lamenting her situa-tion to her sister, who came up with an effective cat-alytic mechanism. Every time the woman took onwork beyond a certain level of revenue – a comfort-able annual salary, in essence – she would pay her sister a $200-a-day penalty fee. My colleague, in-stantly seeing the wonderful impact of the plan, immediately agreed.

Since she redistributed power to her sister, my col-league has gained new control over her life. Now shehappily accepts jobs up to a certain level of income,but she assesses each additional offer with newly crit-ical eyes. (She has taken on extra work on only twooccasions; both projects were too lucrative to passup.) Indeed, the catalytic mechanism has so freed mycolleague from overwork that she has taken on a newrole as a volunteer at her children’s school. With itsundeniable bite, my colleague’s catalytic mecha-nism will have an ongoing effect as long as she hon-ors it. And given its results, she plans to do so for along time.

Would any of these people have changed their liveswithout catalytic mechanisms? Perhaps, but I thinkit less likely. Personal catalytic mechanisms have allthe benefits of organizational mechanisms: they putbite into good intentions, dramatically increasingthe odds of actually being true to your personal visioninstead of letting your dreams remain unrealized.

my research colleague Lane Hornung cataloged mydatabase of catalytic mechanisms, he found thatonly half do. That might surprise some people – inparticular those who ascribe to the old saw thatmoney is the best motivator. I’m not going to claimthat money doesn’t impel people toward desired re-sults; money can add teeth to any catalytic mecha-nism. But to rely entirely on money reflects a shal-low understanding of human behavior.

The U.S. Marine Corps illustrates my point pre-cisely. The Corps builds extraordinary commit-ment through a set of catalytic mechanisms thatcreate intense psychological bonds among its mem-bers. By isolating recruits at boot camps and creat-ing an environment where recruits survive only byrelying upon one another, the Corps triggers thedeep human drive, hardwired into most of us, tosupport and protect those we consider family. Mostpeople will not risk their lives for a year-end bonus,but they will go to great lengths to earn the respectand protect the well-being of their comrades.

William Manchester, who returned to his unit onOkinawa after receiving a wound that earned him aPurple Heart, eloquently describes the psychologyof commitment in his book Goodbye Darkness:

And then, in one of those great thundering jolts inwhich a man’s real motives are revealed to him inan electrifying vision, I understand, at last, why Ijumped hospital that Sunday thirty-five years ago,and, in violation of orders, returned to the front andalmost certain death. It was an act of love. Thosemen on the line were my family, my home.…Theyhad never let me down, and I couldn’t do it to them.I had to be with them rather than to let them die andme live with the knowledge that I might have savedthem. Men, I now knew, do not fight for flag orcountry, for the Marine Corps or glory or any otherabstraction. They fight for one another.1

Yes, catalytic mechanisms sometimes use moneyto add bite, but the best ones also tap deeper wellsof human motivation. Even at Nucor, the effective-ness of its catalytic mechanisms lies as much in thepeer pressure and the desire to not let teammatesdown as in the number of dollars in the weeklybonus envelope. The best people never work solelyfor money. And catalytic mechanisms should re-flect that fact.

Allow your mechanisms to evolve. New catalyticmechanisms sometimes produce unintended nega-tive consequences and need correction. For instance,the first version of the red flag failed because cer-tain students continued to dominate class discus-sion, thinking that every comment of theirs wasworth a red flag. So I added the stipulation: “Your

red flag can be used only once during the quarter.Your red flag is nontransferable; you cannot give orsell it to another student.”

All catalytic mechanisms, in fact, even if theywork perfectly at first, should evolve. 3M’s 15%rule is a case in point. In 1956, executives urged 3Mscientists to use 3M labs during their lunch breakto work on anything they wanted. In the 1960s, thatcatalytic mechanism became formalized as the“15% rule,” whereby scientists could use any 15%of their time. In the 1980s, the 15% rule becamewidely available to 3Mers other than scientists, tobe used for manufacturing and marketing innova-tions, for example. In the 1990s, 3M’s executivesworried that fewer people were using the mecha-nism than in previous decades. It put together atask force to reinvent the 15% rule, bolstering itwith special recognition rewards for those whoused their “bootleg time” – as it has come to becalled –to create profitable innovations.

The 15% rule has been a catalytic mechanism at3M for more than 40 years, but it has continuallyevolved in order to remain relevant and effective.That’s the right approach; no catalytic mechanismshould be viewed as sacred. In a great company,only the core values and purpose are sacred; every-thing else, including a catalytic mechanism, shouldbe open for change.

Build an integrated set. One catalytic mechanismis good; several that reinforce one another as a set iseven better. That’s not to say a company needs hun-dreds of catalytic mechanisms – a handful will do.Consider Granite Rock again. It certainly doesn’trely just on short pay. It also has a catalytic mecha-nism that requires an employee and manager to cre-ate a focused development plan for the employeeduring the performance evaluation process. Indeed,every employee and manager must together com-plete a form that reads: “Learn so that I cancontribute .” Two sets of teeth make thisform effective. First, employees and their managersmust both sign off on the final development plan,which forces a continual dialogue until they reachagreement. Second, compensation ties directly tolearning and improvement, not just job perfor-mance: people who do not go out of their way to im-prove their skills receive lower than midpoint pay.Only those who do a good job and improve theirskills and make a contribution to improving theoverall Granite Rock system receive higher thanmidpoint pay. So people who merely do a good jobself-eject out of Granite Rock. This catalytic mech-anism has produced delightful surprises: one previ-ously illiterate employee used it to get the companyto send him to a reading program. When Granite



Rock won the Baldrige Award, he read an accep-tance speech.

Granite Rock also uses catalytic mechanisms toguide hiring, encourage risk taking, and stimulatenew capabilities. The point here is not so much inthe details as it is in the big picture: Granite Rockdoes not rely solely on short pay to pursue its BHAGof attaining a reputation for customer satisfactionthat exceeds Nordstrom’s. It has about a dozen cat-alytic mechanisms that support and reinforce oneanother.

That said, however, it would be a mistake to takethis article and launch a grand catalytic mechanisminitiative. Developing a set of catalytic mecha-nisms should be an organic process, an ongoing dis-cipline, a habit of mind and action. The dozen or socatalytic mechanisms at Granite Rock came intobeing over a ten-year period. You certainly don’twant to use the idea to create another layer of bu-reaucracy. Catalytic mechanisms should be cata-lysts, not inhibitors.

Castles in the AirI recently worked with a large retail chain to defineits BHAG for the twenty-first century. The companyis doing well, but it wants its performance to be

outrageously great. And so its executives came upwith a wildly ambitious goal: to make its brandmore popular than Coke.

That company’s challenge now is to invent thecatalytic mechanisms that will make the dream areality. I’ve advised its executives against investingheavily in hoopla events to fire up thousands offrontline employees about the new BHAG. Instead,they should create and implement a set of catalyticmechanisms – specific, concrete, and powerful de-vices to lend discipline to their vision. After all, cat-alytic mechanisms alone will not create greatness;they need a dream to guide them. But if you canblend huge, intangible aspirations with simple, tan-gible catalytic mechanisms, then you’ll have themagic combination from which sustained excel-lence grows.

At the conclusion of Walden, Henry DavidThoreau wrote: “If you have built castles in the air,your work need not be lost; that is where theyshould be. Now put the foundations under them.”BHAGs are a company’s wildest dreams. Catalyticmechanisms are their foundations. Build them both.

1. William Manchester, Goodbye Darkness (Boston: Little, Brown andCompany, 1979).

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