Headwaters Inc.’s path to energy industry prominence has been about as predictable as a river changing course and flowing uphill.

When Kirk Benson signed on as chairman and CEO of the company (then Covol Technologies) in 1999, it had been meandering in the wilderness of market obscurity for its four years of existence, and its 1999 revenues of $7 million were a relative trickle to its expenses of $28 million.

Six years later, the company renamed Headwaters had acquired several important “tributary” companies and swelled beyond its banks, finishing fiscal year 2005 with $1.065 billion in revenues—up from $554 million in FY 2004­—and an operating profit of $237 million.

How did this intermittent stream develop into a torrent? According to many industry observers, much of the answer lies in Benson’s empowering brand of leadership, which has fueled Headwaters’ rapid expansion and enabled the company’s geographically dispersed subsidiaries to
operate independently, yet cohesively, within the framework of the South Jordan-based parent company.

Distributed Decision Power

In the past several years, powerful interacting forces have ushered in a time of extraordinary change for business leaders in Utah and throughout the world. The rapid emergence of virtualization, open-source communities, the blogosphere, international trade blocs, nternational outsourcing and the availability of ultra-broadband Internet access signal a mega-trend toward globalization and an ever-shifting competitive landscape.

To thrive in this environment, companies must continually adapt and even reinvent themselves. In response to the imperatives and opportunities created by this evolving global economy, a new leadership approach has emerged—based on distributing institutional knowledge, value creation, strategy and decision accountability more broadly throughout the organization.

 Benson is by no means the only Utah business leader to discover and reap the benefits of distributed leadership (often called “flat leadership,” in reference to Thomas Friedman’s book about global interconnectivity, The World Is Flat.) Recently, Digital iQ had the opportunity to discuss these seminal leadership trends with Benson and two other forward-thinking chief executives from some of Utah’s most dynamic technology companies—Amy Rees Lewis of South Jordan-based MediConnect Global Inc. and Will West of Control4 in Draper—as well as leading Utah-based organizational strategists Dave Ulrich and S. Brett Savage.

Leading the “Collective Creation” Process

Many old economy leaders saw themselves predominantly as controllers and dispatchers of information and resources. Data flow was easily manipulated because the availability of important company information was either minimal or already constrained. Cultural management was mainly a function of establishing internal policies and procedures, then promoting from within to ensure compliance.

In this structure, organizational learning, knowledge and decision making remained at the highest levels of the company, while the tactical components of execution were relegated to mid-level managers and to the rank and file, who functioned with very little or no understanding of how their activities affected core strategic outcomes.

But several environmental factors have changed in the last several years. In response to these phenomena, many innovative leaders have opted to develop “learning-agile” organizations where the collective intelligence of the whole organization is more fully leveraged. 

“More and more, culture is not defined in oracular fashion from the top down, but rather grows organically out of seeds strategically planted by leaders and trained to grow and develop in proper paths,” says Savage, a partner at the Utah-based strategy and organizational development firm Next Phase Advisors. Savage has helped create and implement strategic organizational plans for companies ranging from small startups and growth companies to global giants such as Berkshire Hathaway, Dell, Gen Re, Intel, Novo Nordisk and Proctor & Gamble.

“Sometimes pruning is needed, but mainly culture bears the fruit of the collective intelligence and contributions of individual knowledge workers growing relatively close to one another in the common ground known as ‘the organization,’” Savage says.

In this environment, effective leaders now see themselves as facilitators of culture, communication and brand development. They choose to not circumvent the knowledge or authority of mid-management or the rank and file, lest they stifle or curtail the creative energy and knowledge that is a primary driver for the growth of the company.

“It seems to me that you want to put decisions as close as you can in the hands of the people who have the greatest specialized expertise in a particular area and who are most directly impacted by the decision,” says Benson. “I consciously try to not make the decisions for the organization in place of the employees.”

One of the primary benefits of this approach is the increased speed and reduced cycle times it allows. “Being able to move the organization faster and in the direction you want to go is becoming more and more important,” Benson says.

Another significant benefit is the impact on the self-esteem of the individuals involved: “I have found that we actually get better decisions out of our people when they feel that they are responsible and impacted by the results,” adds Benson. “Making decisions for employees makes me the bottleneck and slows the business down.”

Learning Organizations               

Peter Senge introduced the idea of the learning organization in his influential 1994 book The 5th Discipline. It has taken more than a decade for companies to broadly adopt the notion and change the way they think about the collective intelligence of the organization—in some cases, to even acknowledge that it exists. 

Yet simply existing as a learning organization is not sufficient. In an environment of rapidly-narrowing margins, driven by the increased total availability of information and global competition, learning agility has emerged as a necessary component of corporate sustainability and growth.
Organizations must create systems and cultures which can nimbly assimilate new information and effectively execute on sound decisions. Learning-agile leaders are comfortable with pushing decision-making down the organization, which leads to greatly enhanced employee engagement.

 “One of the key findings of our research is that leaders succeed when and if they have what can be called ‘learning agility,’ or the capacity to grow and be different tomorrow than they are today,” says Ulrich, managing director of the Utah-based RBL (Results-Based Leadership) Group, who has performed consulting engagements with more than half of the Fortune 200 companies, published numerous books and articles and been recognized as one of the nation’s leading management consultants by the publications Fast Company and BusinessWeek.

Ulrich maintains that organizations are as much in need of learning agility as are managers. “They need the ability to experiment, to constantly improve, to look outside their boundaries and to try new things,” he says. “When organizations and leaders do that, both seem to move forward. Companies that have the capacity to constantly be looking for what’s next and how to do what’s next in a better way will be most likely to succeed—which comes from people who are inquisitive and curious, and who demonstrate intellectual curiosity around how to do and improve things.”

Savage adds that to effectively lead a flat organization requires a particular type of mental dexterity and vision. “Leaders in this environment must wear two hats simultaneously,” he says. “The first is the hat of what the organization is at present; the second is the hat of what the organization should become.”

According to Savage, the former “thinking cap” defines the strategic parameters for thriving in the current environment; the latter represents future organizational growth and change. “Effective leaders do not literally see into a future of what will be, but rather, envision a future that is desirable for the organization,” he says. “Finding the right balance in wearing these hats constitutes much of the vision of leadership and can be one of the sources of a leader’s greatest success.”

As Benson says, “One of the obvious challenges of distributing influence and decision making throughout the organization is that people make mistakes, and this enables more people to make them. But one of our cultural values is ‘learning,’ and we see mistakes as an opportunity to learn. So we have increasingly become a learning organization, using our mistakes to learn how to make better decisions.”

Next-Generation Knowledge Management Tools

Distributed leadership also requires a new approach to knowledge management. Knowledge management applications must do more than manipulate information through meta-tags, codification and search-ability. Leaders and knowledge workers need applications that actually create new knowledge from otherwise latent or siloed data in the organization. 

A number of Utah companies, including Engage Thoughtware and Cogito, have developed solutions to address this need. “Today’s leaders are faced with rapid change and increasing competition, including new global competitors,” says Matt Cameron, CEO of Engage Thoughtware, a Bountiful startup that helps generate and facilitate innovation within the organization. “They seek a competitive advantage by increasing innovation in the whole organization and greater speed-to-market in execution. Innovative knowledge management tools must accompany the new breed of organizational management and executive leadership.”

Engage Thoughtware’s ThoughtTree software application provides a virtual
environment for structured communication that allows employees to collaborate with management, peers and subordinates in a safe, ego-free environment. The platform drives significant results by leveraging the collective intelligence of the entire organization and breaking down the human silos of data. The data from this facilitation then become searchable and useable to the entire organization. “We believe that ThoughtTree represents a true breakthrough in the new knowledge management arena,” says Cameron.

Draper-based Cogito has developed another innovative knowledge management system. Organizations house tremendous amounts of digital information, which is often undiscovered and therefore unused. The problem often lies in the inability of the organization to see meaningful corollaries between seemingly unrelated data. Cogito’s technology identifies patterns and relationships found in massive amounts of information—from simple to complex—otherwise unnoticed in the enterprise, creating new knowledge for the organization.

Both Cogito and EngageThoughtware offer graph-based analytics, which help knowledge workers and leaders derive greater understanding out of otherwise siloed or unstructured information in the organization. 

As the research of Ulrich and his RBL colleagues has demonstrated, organizations can learn much the same way an individual can. Next-generation knowledge management tools such as those being developed by EngageThoughtware and Cogito focus on enhancing the ability of the entire organization to create new meaningful and useful information—in other words, to learn.  

Harvesting the Global Talent Pool

Some of the distributed leader’s greatest challenges relate to the recruitment and management of an organization’s knowledge workers. This form of leadership relies significantly on attracting, retaining and developing quality talent. 

“Economic prosperity cannot exist without the essential fuel of talent,” says Pat Vaughn, director of Talent Access Programs (TAP) for the Utah Governor’s Office of Economic Development. “The 21st century has brought a major adjustment in what we look for, how we look for it and ways this talent interacts and is leveraged within the organization. Talent will soon be the most sought-after commodity in modern business, and a company’s ability to develop, attract and retain talent has become a key designator for success.”

The accelerated pace of change in the new economy creates an opportunity, and often a requirement, for managers and individual contributors throughout the organization to play an increasingly strategic role in its success.

MediConnect Global Inc. is in the midst of a period of considerable growth and change. Since Amy Rees Lewis assumed leadership of the company (then MediConnect Inc.) in 2003, the company has quickly established itself as the leading provider of medical record retrieval services for the legal industry, and one of the leading providers in the insurance industry.

In June and July 2006, the companysimultaneously closed a $15 million funding round led by prominent Utah entrepreneur James Lee Sorenson; completed a strategic acquisition of Utah-based ZEROP Medical, formerly the second-leading provider of medical record retrieval services for the legal industry; announced the opening of a new office in Delhi, India and plans to explore
opening other offices in the Asia Pacific region, South America and Europe; changed its name to MediConnect Global Inc. to reflect its increasingly international emphasis; and added three world-renowned business leaders to its board of directors, including James Lee Sorenson, medical device
legend James LeVoy Sorenson and Dr. Naresh Trehan, founder of the celebrated MediCity project in Gurgaon, India and one of the world’s foremost surgeons and medical administrators.

“There is absolutely no way we could have accomplished all of the things we did in the past few months, especially all at once, without significant and strategic input from people in positions throughout the company,” says Lewis. “During and after the acquisition and funding process, I was extremely grateful to be surrounded by people whose skills and integrity were never in question.”

Sometimes leaders may be tempted to feel that it is more time-efficient to make all the important decisions themselves, says Lewis. “But the reality is that if you develop and trust the abilities of others around you, you will end up with far greater opportunities and growth—especially in times like the present in which clients and strategic partners are dispersed throughout the world.”        

The Changing Global Talent Economy

Effective distributed leadership requires leaders to be attuned to the constantly evolving trends and conditions knowledge workers contend with in the global talent economy.

 The Internet, international trade blocs and outsourcing have greatly impacted the evolution of the modern knowledge worker’s career, which is becoming increasingly unique and specialized. More than ever, knowledge workers find themselves competing globally for opportunities. Consequently their perception of accountability, work space and time, and communication in the enterprise is also changing.

While atmospheric elements cannot be controlled, leaders can help flatten and contour the landscape to create an optimal working environment in which the changing forces of the talent economy work in favor of their organizations. In the new environment, companies must develop specific competencies, which in some cases are diametrically opposite to old-economy thinking.

 Accountability. Sales are no longer the sole or primary empirically measured function in the enterprise. Companies now hold managers and employees in every business discipline accountable for their contribution to the top and bottom lines. Employees—and knowledge workers in particular—have responded to this reality and are no longer content to work from 9 to 5 without a sound, holistic understanding of how their work impacts the organization’s core business strategy. Even in the larger enterprise, employees increasingly engage in intrapreneurship (entrepreneurship within the organization) and have largely shifted their focus from process to outcomes.

Work Space and Time. Virtualization, availability of Web collaboration tools such as ASP and online meeting software, document management and collaboration tools such as those developed by Draper-based NextPage and telecommunications advances such as VoIP have made working “on-site” almost unnecessary. These combined elements have changed the way many employees and employers view their workspace and work day. Distributed work environments where employees work from home, at customer facilities or in the office are increasing in popularity, enabling greater flexibility in terms of where and when they perform their labors.

Employers can also benefit from this phenomenon. Sun Microsystems and AT&T recently reported to the U.S. Congress that they saved nearly $100 million in direct costs associated with their distributed work programs.

Professional Function and Approach. The adoption curve and the product life-
cycle have shortened; companies are bought and sold at a phenomenal pace; and in the last decade we are witnessing the birth and materialization of the “fast-company” culture, which values entrepreneurship and intrapreneurship, flexibility and adaptability, fast-paced business decisions and the personalization of work. Employees have responded to these developments by being more nimble and ready for change. They are increasingly specialized in their function, but refuse to focus myopically on the here and now.  It’s no wonder that in this environment contract employment is on the rise. 

Communication. Away from the desk no longer means being away. The ‘Always-On’ generation has emerged, and alternatives to real-time/analog communications are now ubiquitous. Employees and managers communicate interchangeably via cell phones or land lines, SMS, text chat, email and voice mail from home, client offices, the road and—to their frequent chagrin—from vacation spots.

“Communication is a huge issue when you’re trying to flatten an organization and empower those around you,” says Benson. “Email and the Internet have become major enablers of flatter organizations because they allow you to communicate quickly and easily with those who are making important decisions for the company.”

Effective communication is an essential strategic tool for flat organizations. “It is almost impossible to over-emphasize the significance of clear communication within the organization in making sure everyone is aligned on vision and focus, and executing on the same plan,” says Lewis.

Harnessing Passion 

For flat organizations to maintain their success, they need to foster a sense of ownership and accountability from managersand employees throughout the organization. This requires hiring and retaining quality people who are a good fit for the organization and engaging their sustained personal involvement.

Finding and retaining leaders who “can do the job” is necessary but not sufficient; enlightened CEOs seek employees whose personal values and self-identities are closely aligned with the organization’s existing external brand and internal culture.

As Will West of Control4 attests, harnessing the passion of an organization’s people results in vastly improved products, services and market performance. West co-founded Control4, a leading developer of affordable home automation and entertainment systems that run over existing wired or wireless networks, with CTO Eric Smith and Mark Morgan, who leads new product strategy for the company. Both of West’s partners worked closely with him at prior ventures STSN (now iBAHN) and PHAST.

Control4 quickly established a leadership position in its industry, garnering significant product awards and national media attention. West attributes much of this success to the dedication and full engagement of the company’s workforce.

 “We are fortunate to have truly outstanding people in our organization who do more than just write code; they genuinely care about making the product better,” he says. “They have enormous passion around our products, their features and how they work, and the market we are trying to serve.”

Control4 engages this focus and passion by allowing all of its employees to use the products in their homes free of charge. “It’s not a perk,” says West. “It’s an enlightened self-interest for our company; we want to co-opt their passion to use the product to make their lives better and to figure out how the product can make other people’s lives better. Our problem isn’t creating the spirit of innovation in our employees, but rather harnessing it.”

West adds, “All companies must get employees to buy into the common vision and common objectives of the business. If you don’t, you have in effect hourly employees who are watching the clock who are only trying to do enough to keep their job, but not meet and exceed objectives.”

Ultimately, Ulrich and Savage agree, the high level of sustained involvement described by West results in large measure from developing and maintaining relationships of trust with the organization’s workforce.

“Effective leadership is highly personal,” says Ulrich. “Leaders carefully manage personal relationships and build trust.”

“People at all levels of the organization respond to genuine regard for them and their interests,” says Savage. “If you want to grow your company, the key is to grow your people. Empowerment and professional development are the most effective fertilizers for organizational growth.”

Dennis Wood is director of human capital at the Utah-based venture capital firm vSpring. Kimball Thomson is founder and senior editor of Digital iQ and CEO of Next Phase Communications, a Utah-based strategic public relations and marketing communications firm.