firms actually canafford to offer their people high-powered incentives forundertaking both routine and exploratory tasks, partly because the senioremployees of these firms also happen to be the shareholders. But few othercompanies are in a similar position in this respect.It is therefore unlikely that a balance of high-powered incentives will suitmany companies that want to encourage their people to pursue routine andexploratory activities simultaneously. A more promising approach would beto orchestrate a system of weak though balanced incentives. But then theincentive system doesn’t give employees much reason to go the extra mileand exert the extra effort that is so valuable to companies. The solution liesin their culture.52THE McKINSEY QUARTERLY 2002 NUMBER 4Founded just over 30 years ago, Charles Schwab,the San Francisco–based financial-services firm,is now a leader in the US private-brokeragemarket. It has consistently managed to developnew businesses and business models, withouthaving to sacrifice operational efficiency in theprocess.Schwab’s major breakthrough came in the mid-1990s, when it introduced World WideWeb–based on-line brokerage services. Theunderlying technology had not been developed atSchwab, and substantial innovation in its busi-ness system was needed to give its customersthe ability to switch seamlessly between branchand on-line channels. The employees of thebranches would, for example, have to supportcustomers on-line, over the phone, and face-to-face. Obviously, however, the new on-line chan-nel would threaten those very employees. Whatwould motivate them to support on-line trading?Would they be willing to help on-line customers?Wouldn’t they sabotage the channel for fear ofbeing “cannibalized”?Schwab had to ensure that opening the newchannel was the employees’ goal as much as the company’s. Three principles were critical towinning such a commitment:1.Developing a joint vision.First, the companyneeded to unite all its employees behind itsvision of exemplary customer service. This hadbeen Schwab’s aim from the start—but peoplein the branches, and not just their managers,had to see its implications in the context of thenew channel. Everyone in the company had tobelieve that customers must be supported bothon- and off-line. To bring this basic principlehome to employees, management not only hadto understand how it would look from their per-spective but also needed to convey the mes-sage in person. A large team of managers atSchwab’s headquarters went out to thebranches and discussed with their employ-ees—sometimes in late-evening sessions—the meaning of seamless service acrosschannels for customers, the staff, and thecompany as a whole. Schwab found that abso-Schwab’s way
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