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By Root 1099 0

To some business-people, encouraging freedom seems like, at best, a very delicate dance between total anarchy and fruitful experimentation—even to Bob Koski, who worried about the butterflies in formation. Stories of rogue traders taking down banks and high-profile embezzlement cases are guaranteed front-page news, so it’s little wonder that anxious CEOs—especially of publicly traded companies—might live in fear of being one clever thief away from total dissolution. It would be a mistake, however, to assume that this particular type of risk is greater in a free company than any other. If anything, the 97 percent or more who are basically trustworthy are likely to repay the faith vested in them. In any case, managing for the tiny minority—Gordon Forward’s 3 percent—who might somehow pose a threat to a firm’s safety, security, or finances has both costs and risks, too. A company in which people are accustomed to being treated as intrinsically equal and being able to act on their own initiative is, in fact, more likely to catch a rogue or a thief than one in which the dominant culture demands that everyone keeps his head down and minds his own business: Recall Stan Richards’s comment in chapter 11 about goofing off and how the culture—people’s peers, not the boss—disciplines such employees. Terry Holder, the manager of Chaparral’s roll shop in Petersburg, says that peer pressure plays a big role in keeping steelworkers safe at the mill, too. “If you have a young guy,” he says, “missing a step in safety, his peer is going to pull him aside and tell him: ‘Hey, you did not follow a process or safety process. Get your act together and make sure you don’t do this again.’ You’ll have his peer say that more than his manager.”

In a liberated company, more people have more authority to make their own decisions on behalf of the business. This dispersed decision making understandably feels more dangerous—the fewer people there are who can make decisions for themselves, the fewer people, seemingly, can make a bad decision, right? Here, too, the advantages of a highly centralized system are overstated. In fact, they are nonexistent.

This decentralized decision making, which may be perceived as a weakness of a liberated company, is—on the contrary—a major source of strength. All companies, however rigidly organized, are inescapably dependent on everyone who works there. Concentrating authority at the center might appear to reduce the number of sources of decision-making risk. But even people without any authority to take helpful action on the company’s behalf can still commit devastating blunders through incompetence, ignorance, or malice. Nobody has ever sought or granted permission to run an oil tanker aground or crash a train.

At the same time, dispersed authority to make decisions and take actions has enormous benefits. It is true that many people on the frontlines of companies will never see everything the CEO sees from his Olympian perch. But the converse is also true: The head of the company can never know everything that everyone on the front-lines learns every day about how his company and its customers are doing.

Management theorists have borrowed a term from physics to describe the sort of information possessed by these frontline people. They call it a “weak signal,” which is the sort of information that is important—and might later prove vital. But by its nature, it doesn’t rise to the attention of management because it never gets passed up the line or, if it does, it gets lost in the aggregation of data or in the noise of larger problems with stronger signals. One example is the design of the O-rings that sealed the booster rockets of the space shuttle. A NASA engineer knew long before the 1986 Challenger accident that their design was flawed, and he expressed his fear. But because there had not yet been an accident, the signal was weak. By the time it became strong enough for someone to act on, of course, the flaw had become tragically clear. It is the remote starlings, in other words, that are the first to see the falcon