Revisiting the open organization

Paul Kennedy, president, Kennedy Management Partners
Paul Kennedy, president, Kennedy Management Partners

As former president of IDC Canada and marketing director with the Canada Systems Group, reviewer Paul Kennedy has long term experience with both technology and organizational structures, which allows him to provide a unique perspective on management issues. Paul now heads up Kennedy Management Partners, a boutique consulting firm aimed at advising smaller, technology-based companies. Part of his mandate is mentoring, coaching and education – an example of which we see here in his review of The Open Organization. (ed.) 

 

A review by Paul Kennedy

“The Open Organization: Igniting Passion and Performance”

By Jim Whitehurst

Published by Harvard Business Review Press (June 2, 2015)

227 pages, Hardcover ($23.98 Cdn) and Kindle ($14.29 Cdn)

 

The “open organization” of the book’s title is patterned on Red Hat Inc., a Raleigh, NC-based company that provides open-source operating software to the enterprise marketplace. Author Jim Whitehurst has been the CEO there since January 2008, and has doubled the company’s revenue and tripled its market capitalization since he arrived. So I guess he’s earned the right to have something to say.

A big question is how relevant is what the CEO of a company that gives away its product to the rest of us has to say. In a world of shifting and flipping business models, Whitehurst contends that his message is increasingly relevant. And both John Chambers of Cisco, and Michael Dell would appear to agree with him, as they’ve written testimonials to the book.

Whitehurst’s path to the leadership of Red Hat is not typical. Although he has a computer science degree from Rice University, his first employment was with Boston Consulting Group and he spent a decade there, finishing as partner. He was recruited from heavy-hitting management consulting to Delta Airlines as Chief Operating Officer. His seven years at Delta ended with a successful turnaround for the airline that he engineered. He was looking for his next challenge (and he knew he didn’t want another turnaround as he’d laid off tens of thousands of people at Delta) when Red Hat, among many others, approached him.

Jim Whitehurst, CEO, Red Hat Inc.
Jim Whitehurst, CEO, Red Hat Inc.

The Red Hat opportunity intrigued Whitehurst: founded in 1993 in Canada as a catalog company that sold Unix and Linux software accessories, it had pulled off enough successful acquisitions to go public in 1999, and win the InfoWorld “Operating System Product of the Year” award for four consecutive years. In 2002, headquarters was relocated to North Carolina, and the flagship product Red Hat Enterprise Linux (RHEL) was introduced. The only hiccup in this period appears to be a misstatement of financial results for 2004 – 2009 that resulted in a class-action lawsuit.

Jim Whitehurst joined the company, settled the lawsuit, and has never (or rarely) looked back. Red Hat’s operating model was the biggest source of fascination for Whitehurst: the parallel he draws is the bottled water business. Water is free to everyone, and yet people see value in some combination of portability, convenience and purity that the packaging provides. Similarly, Red Hat adds value to free software.

The book retells the story of Linus Thorvalds broadcast on the Internet in 1991: “Hello everybody out there . . . I’m doing a (free) operating system . . . just a hobby . . .nothing professional.” Though hard to believe, the result has been a self-organizing system of thousands of people, including “Red Hatters”, taking direction from informal and respected leaders, who are all working on Linux source code, which is now some 30 million lines strong, accessible and free to everyone. What Red Hat does is provide “peace of mind” by working as part of that larger “open source community”, fixing bugs, thwarting hackers, adding features, and delivering a reliable, enterprise-grade free product. Red Hat’s paying customers sign a contract for support, which provides the company’s revenue stream.

The pervasiveness of Linux is astounding: it’s powerful and reliable enough to run the mainframes at JPMorgan Chase, Goldman Sachs, Google and the US Navy. It’s modular enough to run cameras, refrigerators and Android phones. Microsoft, IBM and Apple all embrace it along with their own proprietary operating systems.

In telling the Red Hat story, Whitehurst avoids the complexity of academics and consultants, and structures the book in a simple, journalistic three-part way, that include:

1. WHY – Motivating and Inspiring

Preferring the word “purpose” to mission or vision, Whitehurst says that purpose and passion create and animate a community, inside and outside an organization.

2, HOW – Getting Things Done

Things get done by consensus, not fiat, in an “open” organization, in which everyone must earn a level of influence through merit.

3. WHAT – Setting Direction

Favouring the word “associates” over employees, Whitehurst works to involve a broad group of them in decision-making.

The author acknowledges that decisions take longer in the “open” organization, and executives do get more frustrated. But he argues that ultimately decisions are almost always better, and more fully executed than in the “closed” management model. And this bottom-up atmosphere supports Red Hat’s “Release early: release often” and “Best idea wins” philosophies.

Each major chapter in the book concludes with “Jim’s Management Tips” – little nuggets that summarize the content or suggest an approach to implementing a concept. And he sprinkles references to other “open” companies through the book – The Body Shop, Whole Foods, Zappos – to reassure us (and perhaps himself) that Red Hat is not entirely alone in its management approach. But does one have to be immersed in the unique “open innovation” environment to fully implement “open management” concepts?

The essential message of this book is that Red Hat has harnessed the decision-making model of the “open source community” – leadership by those with the best ideas, not necessarily those with the bigger titles – and applied it to running a major corporation. Whitehurst illustrates this with approach with a description of Red Hat’s major decision to transition from a desk-top focus to an enterprise focus, and I’m sure it was also used in the more recent shift from enterprise to cloud-mobile focus, although the word ‘cloud’ does not appear in the book.

As a student of the history of technology, and a proud Canadian, I was disappointed to see not a single mention in the book of the founding Red Hat CEO, Robert Young. He’s from Ancaster, Ontario and used the proceeds from his departure in 1999 to buy the Hamilton Tiger Cats of the Canadian Football League. There is reference to the Cornell University lacrosse cap that co-founder Marc Ewing wore while attending Carnegie Mellon University, which gave the company its name. The editing of the book could have been a bit tighter to reduce repetition, but over all, it’s a worthwhile read, especially for managers or executives seeking to draw out the best ideas and commitments from their “associates.”

LEAVE A REPLY