In the large living room of a charming, beautiful beach house in Pebble Beach, California, a young and brash CEO engages in a lively debate with the 11 employees of his new startup. CEO and team go back and forth, pushing one another on essential details of a new product they're developing.
What no one knew at the time was that conversations like this would one day lay the foundation for one of the most valuable companies in the world.
The year was 1985, and the CEO was Steve Jobs.
After being forced out of Apple, Jobs quickly formed a new startup, NeXT. The company developed computers and software targeting the higher education and business markets. Most of the NeXT team were former Apple employees who followed their old boss, and were already accustomed to the spirited debates from their time working together on the Macintosh.
It took 10 years, but NeXT was eventually acquired by Apple, leading to Jobs's taking over as CEO of the company he co-founded. With his return, Jobs brought a management structure and set of cultural norms that has continued to shape Apple to this day.
Studying that structure leads to major lessons for anyone running a business today, from startup to major company.
When Jobs returned in 1997, Apple had a conventional structure for a company of its size. General managers ran products, or "business units," each with their own bottom lines. And, like in many large companies, those general managers often worked against each other, leading Apple to the brink of bankruptcy.
In a recent piece for HBR, Joel M. Podolny and Morten T. Hansen, dean and faculty member of Apple University, respectively, describe how quickly Jobs reorganized things.
"Believing that conventional management had stifled innovation, Jobs, in his first year returning as CEO, laid off the general managers of all the business units (in a single day), put the entire company under one P&L, and combined the disparate functional departments of the business units into one functional organization," write Podolny and Hansen.
In other words, Jobs single-handedly destroyed the silos that were killing Apple, forcing the entire company to work together as a single and cohesive unit.
What's remarkable is that Apple continues to operate under this general structure today, despite the fact the company is nearly 40 times as large in terms of revenue and has grown from around 8,000 employees to 147,000.
Today, CEO Tim Cook (like Jobs before him) "occupies the only position on the organizational chart where the design, engineering, operations, marketing, and retail of any of Apple's main products meet," explain Podolny and Hansen. "In effect, besides the CEO, the company operates with no conventional general managers: people who control an entire process from product development through sales and are judged according to a P&L statement."
Apple's sustained success has proved that its model can work for companies of various sizes.
For this model to work, though, Apple's leaders are expected to have three things:
1. Deep expertise
2. Immersion in the details
3. Willingness to (collaboratively) debate
Let's break each of these down, and see how the lessons can help you and your business.
"Apple is not a company where general managers oversee managers; rather, it is a company where experts lead experts," write Podolny and Hansen.
Today, many companies make the mistake of hiring or promoting people into management who have good organizational skills but who have little expertise in their area of focus. Jobs identified this as an early problem of Apple's.
"We went through that stage in Apple where we went out and thought: 'Oh, we're gonna be a big company, let's hire professional management,'" Jobs said in a 1984 interview. "It didn't work at all. ... They knew how to manage, but they didn't know how to do anything. If you're a great person, why do you want to work for somebody you can't learn anything from?"
According to Jobs, the best managers were the experts who never wanted to be a manager but decided they had to be, because they had the deepest expertise and could guide their teams in the best way.
Apple continues to prioritize expertise and experience today.
"The assumption is that it's easier to train an expert to manage well than to train a manager to be an expert," write Podolny and Hansen. "Apple's leaders believe that world-class talent wants to work for and with other world-class talent in a specialty. It's like joining a sports team where you get to learn from and play with the best."
Immersion in the details
Apple expects its leaders to know intricate details of its team's functions, as this allows them to make better decisions.
"Managers tell war stories about making presentations to senior leaders who drill down into cells on a spreadsheet, lines of code, or a test result on a product," relate Podolny and Hansen.
But as Apple grew, it encountered challenges. Senior leaders couldn't remain immersed in the details of everything; there simply wasn't enough time in the day.
To address this, Apple says it encourages leaders to "decide which activities demand their full attention"; leaders stay fully immersed in the details of those activities. Apple leaders can then delegate other pursuits--which are still important, but of lesser priority--to other members of their team.
The benefits of doing this are twofold. First, leaders create a team of specialists who can learn from one another, and from whom they can quickly access details when needed. Second, they train team members to become experts in their own areas of focus, and how they can delegate should they happen to be promoted to a more senior position in the future.
Of course, many companies have deep collective expertise--which is what makes the third requirement for Apple leaders so important: the willingness to engage in collaborative debate.
Jobs and his team did this 30 years ago, and Apple leaders continue to do it today. Experts debating experts, openly sharing their views and the consequences of potential decisions. And "because no function is responsible for a product or a service on its own," explain Podolny and Hansen, this type of "cross-functional collaboration is crucial."
The key word, though, is collaborative.
Remember, Apple's goal is to eliminate silos and create a single, high-performing team. To do that effectively requires Apple's leaders to work well together, which is why, in theory at least, Apple prefers to promote leaders who are proven collaborators.
"Leaders are expected to hold strong, well-grounded views and advocate forcefully for them, yet also be willing to change their minds when presented with evidence that others' views are better," write Podolny and Hansen. To balance the abilities of being both partisan and open-minded, they explain, depends on those leaders' "deep understanding of and devotion to the company's values and common purpose," as well as a commitment to making decisions that are in harmony with those values and purpose, regardless of degree of difficulty.
The result, explain the authors, are discussions where participants feel free to disagree, push back, and promote or reject ideas--all in the service of improving one another's work and coming up with the best solutions.
In line with this, Podolny and Hansen point out that the bonuses of senior R&D executives are based on Apple's performance numbers as a company, rather than being tied to the success of single products.
That's like a startup--a startup that happens to have over a hundred thousand employees, and has become one of the most valuable companies in the world.
So, if you want your people to work together, instead of against each other, take a lesson from Steve Jobs and find leaders who are:
- Immersed in the details
- Willing to collaboratively debate
Because while Jobs may have died 10 years ago, his management philosophy helped Apple become the company it is today.