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to escape stress and its consequences—available, of course, to a minority, the higher-ups. But there is an alternative, much more dramatic, way the hidden stress-related costs can be reduced—for everybody. Give people real—even perceived—control over their work, stop telling them how to do their jobs, and the stress will go down. Absenteeism will go down; hidden costs will go down. Engagement will go up. All this, of course, is hard to accomplish in “how” companies. As we will see later, the perception of self-control is the key to the free corporate environment that liberating leaders aim to build. There is more good news: Freeing a company’s people to act not only eliminates many hidden costs—it also dramatically boosts its innovation and organic growth, as we’ve seen with Gore.

In sum, although traditional “how” companies are omnipresent and some report organic growth and good margins, their performance could be better—it could be great. What prevents this is the so-called 97 percent, many of whom are disengaged, stressed out, ill, or even absent. The damage doesn’t show up in the official accounting but is hidden in the costs of turnover, workplace stress, and conflict-ridden labor relations. It also shows up in lack of innovation and slumping organic growth. In the NBA, a team on which players are late or absent from training or even games, who snipe at one another and quarrel with the management, can’t dream of going far in the play-offs or even reaching them. In the NBA, teams can’t hide their problems. Their performance consequences are out in the open for everyone to see at the next night’s game. In the corporate world, however, many companies succeed in keeping their failures out of the public eye for a long time. But even official accounting can’t hide these costs forever—think of the legacy airlines or the Detroit three.

The issue we turn to next is when these “how” companies emerged, and why—despite all the underperformance and hidden costs—most firms still organize themselves this way. Then, we’ll discover whether it’s possible for a “how” company to change its culture.

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The Origins of the “How” Culture

THE BUREAUCRATIC, “HOW” approach to running a business seems natural today. But it hasn’t always been that way. It emerged during the Industrial Revolution to address two specific problems: The first was the perceived need to regiment the work habits of artisans accustomed to keeping their own hours and working at their own pace. The second was the need to obtain uniform, reliable output from the mostly illiterate rural workers who were hired into factories in large numbers in the late eighteenth and early nineteenth centuries.

Nowhere was this transformation seen more clearly than in the city of Birmingham in the British Midlands. In 1776, in “the city of a thousand trades”—as Birmingham was known at the time—war in some far-off colonies was the last thing on most people’s minds. Birmingham was busy with a different kind of revolution—an economic one. Since 1769, when James Brindley’s canal from Wolverhampton to Birmingham was opened, the place had been booming.1 Overnight, the canal had transformed Birmingham into an inland port, and the incomparable superiority of water transportation over roads had had a dramatic impact. The price of coal had dropped by half. Flour and bread were much cheaper, thanks to the demise of local grain monopolies. Raw materials from other areas were abundant.

Since 1774, local entrepreneur Matthew Boulton’s factory had been running full speed manufacturing a unique and revolutionary product—James Watt’s steam engine. Watt patented his steam engine in 1769, but after an earlier venture failed, Boulton made the steam engine a commercial success. The first generation of steam engines had been employed primarily in pumping water out of coal mines. But Watt’s new engine was four times more efficient than the older designs, making them practical as a power source for the cotton, corn, and malt mills that had previously relied on water wheels