Jim Whitehurst on the Open Organization: A Conversation with the CEO of Red Hat

Jim Whitehurst is the president and CEO of Red Hat, the world’s leading provider of open-source enterprise IT products and services. Whitehurst strongly advocates using open-source software as a catalyst for business innovation. With a background in business development, finance, and global operations, Whitehurst has a reputation for helping companies flourish—even in the most challenging of times. Since joining Red Hat in January 2008, Whitehurst has helped grow annual company revenue from more than $500 million at the end of February 2008, to more than $2 billion for the company’s 2016 fiscal year. Under his leadership, Red Hat was named to Forbes magazine’s list of “The World’s Most Innovative Companies” in 2015, 2014, and 2012, and named one of the best places to work by Glassdoor in 2016, 2014, and 2013.

Whitehurst’s recent book, The Open Organization: Igniting Passion and Performance (Harvard Business Review Press, June 2015), shows how open principles of management—based on transparency, participation, and community—can help organizations navigate and succeed in a fast-paced, connected era.

Whitehurst recently sat down with Grant Freeland, a BCG senior partner and managing director and the global leader of the firm’s People & Organization practice. Edited excerpts from that conversation follow.

I happen to be a Facebook friend of one of your senior executives. Half the postings I see are excited about going to a Red Hat meeting, excitement about having been at a Red Hat meeting. None of my other friends speak with passion about their meetings. Is that normal for Red Hat employees? How do you build that?

People are emotional beings. Traditional management does its best to wring every bit of emotion out of people, which can often lead to disengagement. We recognize that if you can actually leverage emotion and the passion it creates, you can really double down the effort you get from your people.

Do you have to hire passionate people or can you make them passionate once they’re there?

I think there are some people who enjoy being in a passionate, visceral type of organization and others who don’t. That’s okay. I think about employees almost as a market. We’re looking for specific types of people, and passionate people are part of what we’re looking for.

The Open Organization is more than just passion. What else does it mean?

There are really three core aspects. First is around “why.” Why are people here? Why are they doing what they do? That’s purpose and passion. It’s also engagement. The next layer is around how we do it. That’s not about boxes and lines, but much more about culture and what we celebrate. We focus a lot on meritocracy. We celebrate people who make contributions beyond their day job. Someone who builds a reputation of helping others, being open, willing to give advice, willing to help out—those people rise up. We know who they are, celebrate them, and often see them become key influencers.

The final thing we do is we’re very open in the decision-making process. That doesn’t mean we’re a democracy, but the kind of heuristic that we use is: if you make a decision that surprises people, then you’ve done something wrong.

In your book you say that you don’t really care about whether you have happy employees or even about morale.

Our belief is that if we build an environment where people feel inspired, are engaged in the company, understand the strategy, and know what they need to do to make it successful, we really hope they’re happy—or it’s not a good fit. If you focus on making people happy, you’ll ultimately do the wrong things and make Band-Aid fixes. We never talk about morale. Instead, we create context for people to do their best work. Almost everybody’s going to be happy if you do that. It’s an output, not an input.

You also use the words “thermometer” and “thermostat” to describe people. What do they mean?

There are people in an organization who are thermometers. They reflect the temperature of the organization. There are people who are thermostats, who set the temperature. Understanding who they are is extremely important because, many times, the thermostats aren’t in a leadership position. Yet, they are informal leaders that help guide direction. They’re people that people look to. Proactively engaging those people when you’re making a decision makes the decision execution go so much better, because if the thermostats are engaged and bought in, the thermometers are more likely to agree and follow along.

You describe Red Hat very positively.You also point out that many of those positive characteristics existed before you, and then you built on them. Does this mean that to be a great company you have to be born that way, or can you be a good company and adopt some of these practices and become great?

I’m convinced that the frontline in any organization wants to make a difference. Nobody wants to go to work and say, “I want to do an average job.” The key is to connect what people are doing to a broader purpose. Tapping into “here’s the strategy of the company and here’s what you can do to make it happen” can make a fundamental change in frontline performance. Frankly, the harder part is middle management. The thing I hear most from a lot of executives is, “Okay, I get how to fire up a frontline group, but my middle managers are blockers. How do I get them on board?” In a traditional organization, middle managers played a control function, right? They directed and then they monitored performance. Now, middle managers have a more important role, which is creating the context for people to do their best work.

The whole idea of an open organization is somewhat consistent with the business model of being open-source and leveraging open-source coding. Is that a requirement for an open organization?

Any organization with innovation at the core of its value creation will benefit from this type of organization. I almost wish I’d named the book “Organize for Innovation” because that’s really what we’re talking about here. I’ve even talked to pharmaceutical companies that are very, very focused on IP and its importance. I’ll say “Okay, I understand that IP’s a key part of what you sell, but how do you make IP more valuable internally by sharing and allowing people to build on it?” If you start to articulate it as more about how to organize and orchestrate to optimize innovation, you’ll naturally end up with an open organization.

You were a strategy consultant earlier in your career. This book’s about organization. The classic strategy ideas of position and competitive advantage, how do they relate? Are they no longer relevant? Are they less relevant in the world that you’re working in?

It’s not that positional strategy will totally go away, it’s just becoming less important. I would argue that 30 years ago, scale and scope were 80% of competitive advantage. Now, they’re probably 40%. All of a sudden, your ability to innovate becomes at least half of why an organization exists.