The Living Organization

The Living Organization, by Norman Wolfe, does the most effective job of any book I’ve read in explaining why customer and employee experience should be viewed holistically rather than as distinct disciplines, and why focusing on them together is the key to maximizing enterprise value. Wolfe uses the metaphor of a human body, together with parallels drawn from a range of disciplines from physics to psychology to economics, to show how you can tap into the emotional energy of your customers and employees to realize your organizational purpose. For organizations that outperform others, shareholder value is a result of this focus rather than the primary goal itself.

Wolfe uses the metaphor of a magic trick to make a point about the need for a paradigm shift in how we think about value creation.Magic is about creating what others don’t expect is possible. Without a better explanation, we attribute the better performance of companies like Apple, Trade Joes or Whole Foods to unseen forces. We are limited by the paradigm of thinking of the corporation as a means of production rather than understanding it more holistically to include its purpose. As Wolfe says, “the magic is there, it is simply that we never understood the whole picture of how we did what we did. We simply lack the insight, the details of how the magic of creating results works.” Wolfe shifts the lens from the organization as machine to its role in helping customers and employees tap into a broader purpose. 

Core to the book is the concept that ultimately everything is energy. The Living Organization provides a window into how you can tap into your peoples’ motivation and commitment as a renewable source of energy. This is like the arguments in Seth Godin’s Linchpin, which show how we should think of customer and employee experience as giving a gift, tapping into a reservoir of energy to share the gift with others and keep the energy flowing.

Wolfe shows how energy is either a force supporting progress towards your goals or a force blocking you from reaching them. You can then focus on actions and relationships as levers to convert energy into outcomes. Focusing on actions can drive productivity but doesn’t create as much of an emotional attachment as relationships. Moreover, swirl in an organization creates a lot of negative energy that undermines the organization’s effectiveness to act. The same is true with customers, where friction along the customer journey leads to a “think slow” approach, to borrow a phrase from Daniel Kahneman. As humans, we try to avoid spending energy, which is why 95% of thought is unconscious. It is only when we face something that doesn’t align easily with our prior experience and mental models that we expend more energy.

Culture can be viewed like the concept of the “ether” in physics, which helps spread a wave of light or sound that transfers energy. Wolfe uses this metaphor to show that culture is there, but not something that most managers consider or know how to work with to reach their desired outcomes. Culture can be a force that energizes the company, or it can be one that prevents the company from embracing change. This is why people that are new to an organization evolve their behavior to be more like others. On the brighter side, it is also why positive behaviors can be spread through the interactions among people in their relationship networks, where they draw energy from one another.

Wolfe uses the human body as another metaphor for how your company is a living organization People are the cells, which each have their own focus in converting energy into results. Functional groups or multi-disciplinary teams are organs that help drive repeatable, quality outcomes that are necessary for the health of the organization. The entire organization is the body overall. Like the human body, organizations are not just well-oiled machines. Organizational purpose are the mind and soul, what Wolfe calls the Soulful Purpose. Unlike human beings, machines have no purpose, they just do what they are programmed to do. Your company, as an extension of all the people that make it up, wants to see its purpose realized. It provides a way for people to tap into their innate drives to bond and learn, turning their emotional energy into actions that yield outcomes.

Tapping into the emotional energy of your customers and employees is an act of creation. As Wolfe says, “energy enters our bodies through our senses and is processed through our nervous system and our mental faculties. We know there is a relationship between the energy generated from our thoughts and the energy felt by us as emotions.” Customer and employee experiences are continuously co-created through the way that they interact, giving the gift of experience. Your employees’ and customers’ positive or negative energy impacts the emotions that they feel as they interact with one another. Wolfe shows how avoiding addressing problems in the customer or employee experience is like bottling up water behind a dam. If there is alignment, then the positive energy translates potential energy into kinetic energy, creating a magical experience. If there is a lot of friction, then customers and employees will lose engagement and go elsewhere.

As humans, we choose what we want to create. This is why organizational purpose is so important, as it motivates customers and employees to share their energy. In this way, building a cultural movement can be thought of as a way to add the energy of emotion to peoples’ beliefs. Mindsets are like potential energy. Behaviors are how energy flows in an organization, turning mindsets into kinetic energy. Your employees’ skills make it easier to spread positive energy. Your relationship networks make it easier for the energy to flow more rapidly and without losing force across the organization. Taken together, these are the four building blocks of a cultural movement, and they fit well with Wolfe’s model in The Living Organization.

Wolfe’s thinking is also well aligned to the way that the Katzenbach Center thinks about culture, emphasizing the importance of balance between your formal and informal organization. You can’t incentivize relationships. When formal incentives are used to motivate behavior and there isn’t alignment, then the energy won’t flow freely. Amplifying relationship energy enhances your employees’ natural ability to “discern patterns of behavior, their underlying motivations, and experience empathy.” Wolfe builds on this further, showing how positive emotion results in an “experience of relaxation, calm, and peace.“ This is a psychic reward, which is valuable in habit building loops. Negative emotion creates friction and wastes energy. It overwhelms even the best intended efforts to apply formal organizational levers to drive change, resulting in a lower ROI from investments in customer and employee experience.

 The flow of energy keeps your growth flywheel spinning. Moreover, as people are the source of energy, this is renewable and aligns to the concept of a flywheel. The culture of an organization can either boost or sap energy. Wolfe shows how the same person that contributes low energy to their day job may contribute high energy to an organization where they feel a bond to others involved and a shared purpose, for example where they volunteer their time after work or on weekends. Everyone in the organization can give the gift of experience to customers and to each other, increasing the flow of energy. Wolfe also emphasizes the need to focus their energy rather than allow it to dissipate. Just as you can focus on reducing friction on the customer journey, you can also focus on reducing friction for the employee journey, which will have an impact on your CX through the EX-CX intersection. We can also amplify their contribution to the flow of energy in an organization through learning, which allows people to get more results for less effort.  Moreover, you can increase the amount of energy contributed by tapping into peoples’ inherent drives to bond and learn.

Relationship energy is a key driver of building a stronger brand. Your customers feel the energy that your frontline employees bring to their interactions. This is why we talk about a “branded experience,” and why a person-to-person experience will create more emotional impact than a purely digital one. Wolfe says it well: “experience is the energy that lies underneath the activities of interaction with your people, processes, and products. It provides them with an unseen but quite real jolt of energy that either repels or attracts them to you.”  He uses the example of enjoying a cup of coffee at Starbucks to illustrate this.  If the employees at the Starbucks’ store location bring more energy into their customer interactions, this boosts the customer’s own emotional enjoyment of the experience and reinforces a brand premium.

These are just a few of the insights I gained from reading The Living Organization. I highly recommend reading the full book, not just this review. I hope it sparks some great ideas for you as well!