There are two critical types of accountability, which result in two very different mindsets. If you need to drive complex change initiatives, you have to understand both.
The first type is Accountability For Vertical Results (↑). The focus here is on expanding future possibilities. It is to create breakthroughs to higher sustainable levels of performance. The mindset is one of abundance, possibility and risk taking. It often equates to working on a business, versus within it. It also often equates to exploring disruptive innovations.
The focus of vertical thinking is on expanding future possibilities.
The second type is Accountability For Horizontal Results (→). The focus here is on managing risk and eliminating variability. The mindset is one of seeking safety and predictability. This often equates to working in a business, versus on it. It also often equates to quality and consistent profitability.
The focus of horizontal thinking is on managing risk and eliminating variability.
An Effective Team Or Enterprise Needs Both Ways Of Thinking
For a team or enterprise to survive and thrive, both types of accountability are essential. To successfully lead change, you work from both horizontal and vertical perspectives at the same time. For example, bringing a new product (vertical) to market with minimal risk (horizontal).
When one of these two perspectives dominates, teams or enterprises can get out of balance and performance will drop:
- "Wishful thinking" is what happens when a vertical mindset dominates and horizontal concerns are ignored. For example, sales goes after a market without a tested product.
- "Functionitis" occurs when a horizontal mindset overrides a vertical one. For example, an finance department puts in place cost controls that make it impossible to respond flexibly to competition.
Balancing Horizontal & Vertical Roles Is Essential For Innovation & Enterprise Evolution
Organizations need to be designed to maintain a healthy balance between these two types of accountabilities. Leaders higher in the decision-making hierarchy should have a center of gravity that is more vertical. Managers and workers lower in this hierarchy should have a center of gravity that is more horizontal.
This healthy balance is also important among leadership roles. For example, a key driver for leading change successfully is strength and power of the business leader role. Often when this more vertical role is missing, there is no effective counter-balance to (necessarily) more horizontal perspectives of functional silos. This dynamic is often the cause for failing change initiatives.
This dynamic also reveals the significance of a collaborative culture. In a collaborative culture, there is not only a healthy balance between vertical and horizontal, but the tensions that arise naturally are respected and honored.
In such a culture, leaders and team members have the skills and tools to operate in a multi-stakeholder environment and drive critical conversations to resolution.
The real power of this thinking is that it reframes the naturally occurring conflict between horizontal and vertical roles as essential to innovation and enterprise evolution.
Evaluate Leaders By Their Horizontal & Vertical Contributions
In fact, the effectiveness of leaders can be graded terms of both their horizontal and vertical contributions.
Here's a story: once upon a time an entrepreneur founded a business. Selling on her own, she grew annual revenues to $4M. At that point, she reached her limit and despite trying, could not sell at a higher rate. Recognizing that the primary constraint to growth in her business was in the sales process, the entrepreneur hired a salesman.
The salesman was very good at sales but was terrible as a co-worker. He was self-centered and sometimes even abusive. However, he did help to further grow revenues to $10M.
At this point, the salesman threatened to leave, unless he got more compensation. The entrepreneur did not like conflict and tried to avoid it.
At first, she felt like he was holding her hostage, but then she completely reversed her thinking and decided to sell him a stake in the business. She believed that this approach would compel him to better align his interests and behaviors with her needs and those of the enterprise. She also thought it would be less expensive in the short run.
The value of the firm was estimated at $5M. The salesman bought 30% of the business at a significant discount for $1.4M to be paid out of bonuses that he would receive over three years. Over the next four years he helped to grow revenues to $20M. However, his general behavior did not change.
Then, unfortunately, the salesman and now part owner, died in a nighttime helicopter-skiing accident. The entrepreneur felt relieved and guilty at the same time. Over the next year, the revenues of the business shrank back to $10M.
Then the salesmen’s widow demanded $1.5M or 30% of the value of the company. The entrepreneur negotiated a deal to pay her over 5 years. Unfortunately, this deal left her with little money to reinvest in business, and not enough to hire another sales person.
Here is the salesman’s report card:
o Horizontal Contribution: A
o Vertical Contribution: D
Conclusion: He was very successful from a horizontal perspective, but he failed from a vertical perspective.
Here is the entrepreneur’s report card:
o Horizontal Contribution: C
o Vertical Contribution: D
Conclusion: She performed worse than the salesman from a horizontal perspective, and she also failed from a vertical perspective.
In short, the salesman was a great salesman and a poor leader and the entrepreneur was just a poor leader. She made a very poor leadership and investment decision from a vertical perspective when she sold him part of her business.