The Drucker Difference

For Nokia, One Good Call, One Bad


Investors and technology watchers are trying to figure out whether Nokia (NOK) has markedly improved, or furthered damaged, its position in the cutthroat mobile communications business. But it's the company's internal communications that Peter Drucker would have wondered most about.

Nokia announced last week that it planned to form an alliance under which it will use a Microsoft (MSFT) product as its primary operating system for smartphones. In going with Windows Phone 7, the Finnish company will largely leave behind its own Symbian operating system. By joining with Microsoft, Nokia also has elected to bypass other options, such as tapping Google's (GOOG) Android software.

The partnership with Microsoft represents a dramatic shift for Nokia—and for good reason. The company's share of the smartphone market has deteriorated rapidly in the face of Android and Apple's (AAPL) iPhone. In some crucial parts of the world, such as the U.S., Nokia is all but invisible.

Making a Splash

Nokia Chief Executive Stephen Elop, in what has turned into an instant shoo-in for the Corporate Memo Hall of Fame, went so far as to liken the company's situation to a man who finds himself standing on a burning oil rig. To save himself, the man jumps into the North Sea.

"In ordinary circumstances, the man would never consider plunging into icy waters," Elop wrote employees in a missive issued shortly ahead of the Microsoft announcement. "But these were not ordinary times—his platform was on fire. The man survived the fall and the waters. After he was rescued, he noted that a 'burning platform' caused a radical change in his behavior.

"We too, are standing on a 'burning platform,' and we must decide how we are going to change our behavior."

Drucker would have appreciated the candor and sense of vision in Elop's comments, especially given the hotly competitive environment in which Nokia finds itself. During the most challenging times, Drucker wrote, management's most important task is to make sure of the institution's "structural strength and soundness, of its capacity to survive a blow, to adapt to sudden change, and to avail itself of new opportunities."

Selling the Decision

The tougher question, though, is this: How effectively did Elop communicate his thinking in advance of unveiling the Microsoft deal?

Drucker believed that a key step in any decision is to achieve sufficient buy-in throughout the company before going forward. It's a lesson, he added, that he learned from the Japanese. "As soon as the decision-making process starts, and long before the final decision is made, Japanese management sells the decision," Drucker explained. "Japanese decisions are not being made by consensus; that's a mistranslation of the Japanese term. The correct translation would be something like 'common understanding.'"

There are, of course, practical and legal limits to how much any leader can say to the troops on the front end of a transaction. That holds particularly true at a huge corporation such as Nokia, which has more than 130,000 people on the payroll. But the general notion—that leadership is, in Drucker's words, largely "a marketing job" and organizations need to view employees as a kind of customer—is one that more managers need to pay attention to.

In the case of the Japanese, "everyone who is likely to be affected by a decision—say, to go into a joint venture with a Western company or to acquire a minority stake in a potential U.S. distributor—is asked to write down how such a decision would affect his work, job, and unit," Drucker noted. "He is expressly forbidden to have an opinion or to recommend or to object to the possible move. But he is expected to think it through. Top management, in turn, knows where each of these people stands. Then top management makes the decision from the top down."

At that point, everyone already has a stake in the company's new direction. Each employee is thoroughly prepared for what's coming. "There is no need to sell it—it's been sold," Drucker concluded.

Sharing the Journey

At Nokia, by contrast, employees seemed taken aback by the Microsoft news. The day it came down, more than 1,000 workers walked out of the company's offices in protest. Many are concerned about layoffs. Meanwhile, rivals are busy poaching talent. "Any Nokia software engineers need a job? We're hiring," read the tweet from a Google recruiter.

Elop, who left Microsoft to join Nokia last September, has taken his lumps for hooking up with his old company. A group of small shareholders is calling for his ouster, and plenty of analysts are questioning the wisdom of the alliance.

But in the end, even if Elop persuades these outsiders that his strategy makes sense, it's the insiders who will have to deliver the results. As Drucker said, "Unless the organization has 'bought' the decision, it will remain ineffectual."

Asked about the negative reaction from so many his workers, Elop remarked: "Every employee goes through an emotional journey, and the emotional journey is difficult, because this is such a big change. I've had four and a half months to go through my emotional journey, ending up in a very different position from what I had assumed when I first joined."

Had more Nokia workers gone through at least some of the journey with him, and not been handed the road map after the fact, the company would be in a stronger place now.

Wartzman
Rick Wartzman is the executive director of the Drucker Institute at Claremont Graduate University.

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