I recently came across a highly interesting paper titled “The Emotionally Bonded Organization: Why Emotional Infrastructure Matters And How Leaders Can Build It” by Vijay Govindarajan, Professor of International Business at The Tuck School of Busines at Dartmouth College, and Subroto Bagchi, co-founder of MindTree, an Indian IT-company.

While reading the above 35 pages paper, I was reminded again and again of things that we had done at my previous company, Merck Thailand, where we had a strong focus on soft issues. However, we had not put it into an academic leadership framework. As Govindarajan and Bagchi state, until now, very little in the literature or research on management has focused on how to build emotional infrastructure.

Let me share with you some details on the concept of the “emotionally bonded organization” and the eight factors that build emotional infrastructure.

In Govindarajan’s view, all organizations consist of three types of infrastructure:

a) physical (buildings, equipment etc.)

b) intellectual (brainpower: the organization’s competencencies, key processes, its people and their expertise, etc.)

c) emotional (the aggregated positive feelings employees have for the organization and for each other)

In comparison to physical and intellectual infrastructure, emotional infrastructure is the most time-intensive and most difficult to build. Executives often spend a great deal of time and energy on the first two elements, but too often neglect the third.

Despite the fact that the cost for building emotional infrastructure that motivates people to do their best for the corporate good  is relatively low, it can yield a sizeable and sustainable competitive advantage. And it is the most difficult for a competitor to copy.

Govindarajan says that he got the idea for emotional infrastructure by observing the behaviour of family units. If there is one institution that has survived over the centuries, it is the family.

Based on socialogical research on families and groups, Govindarajan and Bagchi have identified eight factors that are present in emotionally bonded organizations.

Leaders must consciously build emotional infrastructure through:

1. proximate leadership

2. transparent and rich communication

3. incorporation of myths and rituals

4. constructive response to adversity

5. encouragement of multiple support networks

6. articulation of a bold vision

7. adherence to deeper values

8. creation of a sense of exclusivity

Govindarajan and Bagchi urge leaders to keep the above eight factors in mind and to ask themselves the following questions:

1. Proximity

Do my people feel I am distant, or “next door”? Are my leaders up and down the organization practice pull-based, as compared to push-based, leadership?

This is about how leadership presence is delivered in the organization. Many leaders show up only when  t h e y  think it is appropriate. However it is important that leaders create opportunities for white-space interaction with people at all levels.

At Merck Thailand, we created various communication events, often without any specific agenda, e.g. “Coff(r)ee Talk” (an opportunity for randomly selected people at officer level to ask the managing director any question), “Lunch with MD (=managing director)” for middle managers and “Staff Meets Management”-meetings where all interested employees could discuss any issue with members of the leadership team.

In organizations where there is proximate leadership, people know at any point in time where the leader’s and the organization’s priorities are. Goals are clearly communicated and widely shared; the whole organization is aligned. The American leadership guru Stephen Covey speaks in this context of the “Three Wildly Important Goals (WIGs)”.

Another way for leaders to build greater proximity and which worked well for me is to let their colleagues know more about their private lifes, their family members, their hobbies etc.

2. Rich Communication

How openly, how frequently, and how well do we, as an organization, communicate? Who can communicate with whom?

Rich communication is real-time, multi-media and encourages high interactivity. Apart from smart technology, in an emotionally-bonded organization leaders are trained to communicate. They understand how to handle questions and queries, counter spam and gossip and build points of view.

3. Myths and Rituals

What are the core myths and rituals that define our organization? How widespread are they? Who owns these?

People subscribe to a set of ideas that the organization as a whole represents. Ideas and stories need to be carried in the company from one place to another, from one generation to another. Mythic and ritualistic elements contribute to create a unique identity and to give employees the sense that they are part of  something distinctive, which activates pride and passion.

At Merck Thailand, we published booklets containing stories of employees and customers describing experiences where they had observed the organization’s core value “care” in action.

One ritual that we had at Merck Thailand where every employee was looking forward to was a mega party that we always had at the end of our annual corporate take-0ff meeting for all our employees. Our company wasn’t shy to hire  show stars to perform at that event. It was a way to say “thank you!” to our employees, to build momentum for the new business year and to strengthen the emotional bonding.

4. Bonding through Adversity

How well do we handle adversity? Do we view it as a crisis or an opportunity?

As Govindarajan and Bagchi state: “Times of adversity give leaders a rare opportunity to show that they genuinely care about their employees and thus to strengthen the emotional bond. Unfortunately, most corporations destroy emotional infrastructure in the face of adversity by reengineering and downsizing their workforces in order to improve short-term profits while at the same time giving top management handsome compensation.”

A great example for bonding through adversity is Southwest Airlines who was the only airline in the U.S. that didn’t lay off any employees after the 9/11-incidents. They remain until now the most profitable airline in the U.S.

Viewing crisis as an opportunity is a key issue. Leaders need to stay optimistic.

5. Voluntary Support Networks

Do our people at every level have a support network? Do we, as an organization, encourage the creation of these voluntary networks?

According to Govindarajan and Bagchi, leaders have to realize that formal, structured systems have their limitations. Leaders need to help create, support and nurture alternative support networks.

At Merck Thailand, we had an employee development program called “Stepping up to leadership” that we rolled out across all departments and across all hierarchical levels. Always twenty people formed one training group. Although it was not really our initial strategic intention, we soon observed strong informal networks flourish across the organization.

A similar case was the “Merck University” where senior Merck executives from across the globe were put together in a top talent group attending training modules at universities in four countries that lasted two weeks each. As a result of the time that the executives spent together, strong informal networks developed across continents and business areas.

6. A Bold Vision

Do we have a bold, even unrealistic vision? Does the majority of our people understand and embrace it?

The essence of a vision is that it takes the long view of time and works in an opportunity-backward manner and not a constraint-forward manner. In an organization with a strong emotional infrastructure, there is an articulated vision that is often bold and ambitious. The style of thinking changes from present-forward to future-backward.

Govindarajan and Bagchi cite the vision of Tata Motors, an Indian multinational, in 2004: “Our intent is to create a high quality 4-passenger automobile priced at $ 2,000.– that meets all emission requirements”. Such a statement provokes an emotional response. People are drawn to a bold, challenging  and unrealistic goal.

A bold vision has the potential to produce breakthrough innovation. In 2008, Tata introduced its “Nano”-car, a $ 2,500.– car, a huge success.

7. Deeper Values

What are our organizational values? Do they go deeper than just business choices to acknowledge more fundamental societal needs? How well do we adhere to them? What price have we paid recently to uphold our values?

Values are the fabric of  social contract between the employees and all stakeholders of the organization. Leaders need to live the values. They insist on value match ahead of competence match while recruiting new staff. And they take strong actions when values are violated so that the essence of the organization survives.

At Merck Thailand, applicants had to answer already online three questions related to our values when submitting their job applications. In interviews during the recruitment process as well as in talent development assessment centres, there was a focus on value-related topics.

8. Extreme Exclusivity

How selective are we in setting entrance criteria? How unconditional is our acceptance of those who become members?

As Govindarajan and Bagchi state, easy come is always easy go. Emotionally bonded organizations have a certain entry criterion that creates a fence around itself which actually attracts believers and retains them. Emotionally bonded organizations pay great attention to who can join. This process of engagement goes a long way toward assimilation, alignment, and retention.

At Merck Thailand, the managing director and members of the leadership team were strongly involved in the organization’s recruitment process as well as in the employee development process. This was quite time-intensive, but, out of our experience, it was time well spent.

Concluding, it can be stated that strong emotional infrastructure results from deliberate choices at the top. Leaders who consciously build emotional infrastructure will gain an enduring competitive advantage.