How a measured approach to "dialog" can unlock organizational potential and improve productivity

December 2004

When Richard Lindenmuth took the reins of Quantegy, a midsized manufacturer of magnetic recording products, he knew the company wouldn't survive without quick action to modernize its products from tapes to digital media.

What he didn't know was how to tap the expertise of Quantegy's 2,000 workers, many of whom had been with the Alabama company for more than 25 years.
"One hundred percent of the knowledge you need to fix a company is inside the company," says Lindenmuth. "The guy on the factory floor who sees inventory piling up because of lost sales has an opinion. People in other countries who did business with us were hearing things that gave them an opinion. So the challenge was how to engage those people in a conversation."

For help, Lindenmuth turned to Howard Perlmutter, a former business school professor who had pioneered a process he calls Deep DialogSM to help business leaders quickly establish trust and share knowledge with workers, customers and suppliers.

"All the major business disasters I've seen in my career have largely stemmed from failures of interactive communication," says Perlmutter, emeritus professor at the University of Pennsylvania's Wharton School. "When companies and business leaders fail in this kind of dialogue, it doesn't get better without help."

Put simply, Deep Dialog is a diagnostic tool that examines not only how well an organization shares information, but also how effectively different groups of people relate to one another. The process measures seven drivers of effective dialog, ranging from "bridging," which is defined as being open to differences, to "building," which is the highest indicator of shared vision and objectives. It also charts five key "dialog deficits" that impede clear communication and overall trust.

The seeds of this process were first planted more than 15 years ago, when Perlmutter was teaching a CEO seminar in Switzerland. As an exercise, he asked the 600 top executives in attendance — most of whom had never met before — to spend four hours in small groups. The goal: Find ways for your respective companies to form a business alliance. When time ran out, 70 percent of the teams had arrived at workable proposals, and 20 percent actually made plans to follow up on the new ideas.

The results of the exercise, which forced many of the CEOs into counterintuitive thought patterns, prompted Perlmutter to continue refining the process with small groups. And, when he was asked to consult on the 1989 acquisition of Philips Electronics by Whirlpool, he found the perfect opportunity to test drive the approach in an actual business setting.

Seeking to improve its market share in Europe, Whirlpool's purchase of Netherlands-based Philips made perfect sense. However, 90 percent of Whirlpool executives had never traveled overseas, and there was lot of concern within the Philips management team that Whirlpool would take a single "Americanized" approach to key cultural and marketplace issues.

Recognizing the potential business threats, company leaders used those results to design and launch a series of face-to-face meetings between all management staff across the globe. The goal: To demonstrate why idea sharing and effective collaboration — not individual competition — would lead to career and organizational success in the merged organization.

Those meetings led to several marketing and product ideas, including the highly successful launch of a side-by-side refrigerator concept in Europe. Over the next five years, Whirlpool successfully increased its European market share by 10 percent, the result of a well-conceived brand consolidation driven by people who had learned to collaborate toward shared goals.

The Whirlpool-Philips success story was especially appealing to Lindenmuth, who arrived at Quantegy in 1999 after spending the better part of three decades as a turnaround specialist for troubled companies around the world.
"In that company, things stayed the same for about 40 years," Lindenmuth says. "But when things went from analog to digital, they didn't see the coming revolution."

An initial assessment revealed a number of key communication deficits. For example, members of European business units said they felt completely out of the loop on pricing, quality and marketing decisions, which were made at the company's Alabama headquarters. As a result, Lindenmuth made sure they were at the table for new discussions, which led to the discontinuance of one product line and the introduction of a second product into new markets, which led to a 50 percent increase in sales over the next year.

Along the way, Lindenmuth and his managers continued to have regular small-group meetings with employees, where they shared findings from various business areas. During these sessions, conversation was encouraged and virtually no topic was off the table. And, despite the fact that Quantegy had to cut its workforce from 2,000 to 250 over a five-year period, productivity is at an all-time high, and the company is more competitive than ever.

Those tangible returns, Lindenmuth says, are a direct result of the change in culture brought about by the process.

"If you've created a conversation where you've got people consistently looking for the next great idea or the next key cost savings, you can do a 180-degree turnaround in a company and still have people with you," he says. "But if you just let things go and don't communicate for an extended period, every minor change you try to make will be hit with second-guessing, fearfulness, uncertainty and a range of other things that cost time and money."

The seven essential processes for successful dialog:

• Bridging. A first step to deal effectively with time, language, cultural or geographic distinctions.
• Bonding. Developing relationships based on mutual trust and respect.
• Banding. Developing a sense of collective identity, speaking of "we" instead of "I" and "you."
• Blending. Developing ways to combine ideas for innovation, building on strengths to collaborate creatively.
• Bounding. Developing ways to focus on shared objectives.
• Binding. Developing a commitment to work on shared projects with shared stakes in the outcome.
• Building. Developing commitment to practical actions, such as implementing key projects that help drive shared vision and governance.

The five deficits that can undermine the dialog process:

• Fallow. Found when people never get conversations started or actively avoid dialog with co-workers or other key partners.
• Failed. Found when people nurse old wounds from failed attempts at conversation. Bad memories, unhealed wounds and unsettled scores make it difficult to renew the dialog even though cooperation is essential.
• Failing. Found when trust and respect erodes between managers in different organizational silos.
• Feeble. Found when shallow dialog occurs, characterized by little openness, inattentive listening and superficial, defensive encounters.
• Frozen. Found when managers become stuck in fixed positions, unable to move from polarized stalemates.