Brain Farts

Profit sharing vs. Incentives

giantknave Brain Farts , , ,

sharing-is-caringSo I was in a meeting. A colleague spoke up and said that she felt that incentives weren’t a good thing, that they caused much damage and that it would be better to remove their use and replace them with something better.

This was followed by the usual conversation that ‘bad’ objective setting is clearly the actual problem…and implied that the (obvious and only) answer was to continually strive to set ‘good’ objectives (incl. targets and linked incentives).

Finally, it led to a discussion as to how different organisations handle the issue of pay. Two particular comments made of interest to me were that:

  • “most organisations have incentive schemes”, with the implication that therefore this must be right; and
  • some organisations use a ‘profit sharing’ concept and, “really, this is incentives just by a different name… isn’t it?”.

Now, there are (what I believe to be) some important points that I’d like to put out there regarding each of these two comments. Here goes…

Part 1 – The problem being the quality of the objectives

To run a ‘performance related’ incentive scheme, an organisation needs to do four things:

  • set out meaningful (?) personal objectives (which are ‘cascaded’ down from above, hopefully derived from some customer related purpose);
  • set criteria from which to measure a person’s performance against these objectives (i.e. targets);
  • judge a person’s performance against these criteria; and
  • lay out a financial methodology to convert this judgement of performance into a (contingent) monetary reward.

I have already written posts that are highly relevant to each of these points. In particular:

and perhaps most importantly:

  • I have written about the science showing the harm caused by using extrinsic motivators in The chasm and Money as pay. I used the analogy of Don’t feed the animals.
  • …and on the related matter of purpose (from which those cascaded personal objectives theoretically originate), I have written about why this shouldn’t be seen simply as ‘to make profit’. I wrote about this in Oxygen isn’t what life is about

I hope that this gives you plenty of thought to explain my contention that, in Ackoff’s words, we shouldn’t be “trying to make a wrong thing righter”.

The issue is NOT with poorly set personal objectives, criteria, judgements and financials methodology. You can fiddle with these all day long but you won’t remove the fundamental flaw within.

Part 2 – Is Profit sharing the same as incentives?

Firstly, what do I mean by profit sharing as opposed to incentives? Here are definitions for each:

Definition of Profit sharing: All employees share in the success of the organisation.

“Employees receive a variable amount each year (or some other increment of time) where this variable reflects the pre-tax prosperity of the company.” (Scholtes)

Note that such profit sharing can be carried out in a myriad of ways. Some of these are:

  • Same percentage of salary per employee (this is probably the most common method)
  • Same absolute amount per employee i.e. shared equally, from the Contact Centre Agent through to the General Manager. Promoters of this method argue that:
    • People’s salary already caters for the market rate of their skills and experience;
    • We shouldn’t be implying that some people contribute more to a company’s prosperity than others…indeed some would argue that the most important people are the front line staff and they spend much of their time protecting the customer from the decisions made by command and control managers!
  • The use of some seniority factor: i.e. profit share based around tenure – promoters of this method suggest it encourage long-term thinking*
  • some hybrid of the above

* Note: A key consideration for anyone designing a profit share method is to avoid short-termism. Alternative thinking on how to achieve this might be to consider payment in shares that can’t be sold for a certain period, or payments into a person’s pension scheme, or [some other way of thinking outside the box]

Definition of Incentives: Extrinsic motivators – the offering of something (usually money) on a contingent basis in order to control how someone acts. ‘Do this to get that’.

At work, such incentives link to the idea of ‘paying for performance/ merit’ i.e. the setting of a challenge and then the judgement as to whether/ how well it has been met and the subsequent release of the contingent reward.

A comparison:

So, with these two definitions, I can now explain, via the following table, why profit sharing (however done) and incentives are very different:

Comparison: Incentives: Profit Sharing:

Purpose

 Optimising the parts of the system, at the expense of the whole: ‘Meet personal objectives’ usurps overall purpose, with departments, and people within, pulling in competing directions.

Personal objectives create:

  • silo’d thinking and competition;
  • barriers to collaboration

Effort: massive time and effort spent in cascading, wording and ‘agreeing’ objectives

Static: Once ‘locked in’ each year, people are constrained by this thinking.

 Optimising the system: Encourages collaboration since everyone (horizontally and vertically) is joined together towards the same purpose.

Encourage people to think about the ‘customer’ and their horizontal flow of value.

Effort: Little effort required. The purpose remains as ‘True North’

Dynamic: People can continually move in new innovative directions towards the one purpose, liberated from personal objectives.
Targets Required as ‘criteria’ for the objectives.

People are only truly interested in their own targets.

 Not required.

People are now interested in measures (NOT targets) in how the system works and whether it is improving.
Judgement Required to ‘score’ people against.

Much time and emotional effort to run the judgement process, and deal with the de-motivating fall out…

…which occurs due to the impossibility of making a fair judgement.

 Not required. 

Can now move to coaching conversations that are divorced from judgements and rewards…likely leading to open-ness, learning and self-development
Motivation Extrinsic People collaborating towards a combined purpose which they now believe in, leading to/ enabling intrinsic motivation

…and for anyone who holds that incentives must be right because everyone else seems to be doing it, you might be interested in my earlier post on Benchmarking.

To end with some thoughts for the way forward:

After very skilfully dealing with the subject of pay and performance in his book ‘The Leaders Handbook’, Scholtes puts forward (what I consider to be) some very useful guidelines when it comes to pay:

  • Employee compensation should be a completely separate process from the employee feedback system;
  • performance issues are one thing. Pay issues are another. Keep them separate. Don’t try to solve performance problems with pay solutions;
  • There should be no merit pay, because it is virtually impossible to differentiate on the basis of merit; (Note: My post titled Outstanding discusses this)
  • All employees should benefit from the success of the company through profit sharing;
  • The greatest sources of motivation are intrinsic. Pay cannot motivate, but pay that is perceived to be unfair can de-motivate.

Yellow polka-dot belts

giantknave Brain Farts , , , , ,

Yellow polka dot beltThis is a short and simple post that merely shares a most excellent quote that I have on my wall – it says so much to me:

“To break down silos and look at work cross-functionally, an organization has to confront how it approaches incentives, bonuses, performance reviews, and the like.

Without a senior leader in place who understands the nature of flow and likely has experienced the benefits of holistic work systems, middle managers’ hands are tied.

Without a clear vision from the top, the most motivated middle manager who “gets it” can do very little to experiment with cells.

So here we are again – back to leadership. Instead of junior-level people getting black belts, green belts, and yellow polka-dot belts, leaders have to learn about these principles. We have a long way to go.” (Karen Martin)

 

Oxygen isn’t what life is about

giantknave Brain Farts , , , , , , , , ,

LungsI often hear people talking about the need for profit and that my thinking must address this fact. I respond that it does, but not as they might think. This post tries to explain.

There are two types of ‘for profit’ organisational thinking, both of which consider that profit is necessary…and there the similarity ends.

Type 1: Considers profit as the overall goal and purpose of the organisation ‘at any cost’;

Type 2: Perceives profit as necessary for the organisation’s survival, but not its reason for existence. Profit to such an organisation “will be seen as breathing is to a human organism, but not what life is about.” (H. Thomas Johnson)

The difference in management systems and outcomes for these two types of thinking will be profound.

Below are a number of convergent viewpoints from key thinkers backing a ‘Type 2’ view on profit:

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Aaron Dignan, in his talk on the operating model that is eating the world, explains the over-riding importance of purpose. He uses the examples of Facebook, Apple, Amazon, Tesla (and many other highly successful organisations operating beyond traditional 20th century western management thinking) to explain that:

  • It’s not about the money, it’s about the mission [purpose]. The idea of putting values above revenues is really important and defines how powerful that purpose can be!
    • Put another way, placing profit above your stated purpose means that it usurps this purpose.
  • The leaders of these organisations, such as Amazon’s Jeff Bezos, make this very clear to the market: “This is our mission, it’s long term, if you don’t like it, get out of our stock”.
    • This message is very useful for the company and potential investors – it provides transparency; allows the company to focus on what it is actually trying to do; and it allows prospective and existing investors to make clear investment decisions…it also provides them with a high degree of confidence in the organisation.
  •  Playing a long game is a really good sign that an organisation has its purpose screwed on tight. They’re not playing to the (financial reporting) quarter or to ‘the man in the street’, they are playing to the purpose…and that means that they might have to make long term bets and let things play out and then cash out over time.

Cause and effect: If you truly focus on purpose, the effect will be a highly successful organisation (and happy investors).

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Sir Richard Branson has a very clear philosophy on priorities : “put your staff first, customers second and your shareholders third”. This is the complete opposite of the traditional view, but there is a simple yet profound logic within which Branson says “should go without saying and it’s surprising that it still doesn’t in many organisations”.

Put simply, if the people working at your company are 100% proud of the job they are doing, are given the tools to do a good job, are treated well and (consequently) are proud of the brand then they are going to truly look after the customer.

Cause and effect: The shareholders do well because the customers do better because your staff are (truly) happy.

A caveat: Don’t think that you can hoodwink your staff (i.e. with words, ‘canned fun’ and/or bribes) into thinking that they are ‘first’ if this is not so…they will see right through such a facade.

A reality check: If your people aren’t proud of what they do/ where they work then you have a problem with your priorities.

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Mike Rother, in his book ‘Toyota Kata’, sets out an interesting historical perspective of how we arrived at the traditional 20th century (Western) management approach. In it he quotes Alfred P Sloan (President and then Chief Exec. and Chairman of General Motors between 1923 – 56) as saying:

“We are not in the business of making cars, we are in the business of making money.” *

You might come back at me and say, “well he’s right isn’t he? We might ‘say’ our purpose is ‘xyz’ but it’s actually about the money.”

To this, I would say that we need to recognise that customer, employee and investor make up necessary components of an organisation’s system and, going back to harmony or cacophony, we should understand that we can’t put one component (e.g. investors) above the others and expect it to be good for the system. In fact, to do so will cause unknown and unknowable harm to the system.

We need to understand the system and its purpose and then act in such a way as to derive a win/win/win scenario….which goes back to Dignan’s point about purpose and Branson’s point about priorities.

Cause and effect: Optimising the system will be good for all of its components over the long term.

A caveat: If you ‘say’ it’s all about purpose but underneath it all it isn’t then don’t be surprised at your inability to move towards it. This is a classic case of POSIWID.

* Note: General Motors made a 2007 financial loss of US$38.7 Billion and, after running out of cash soon after, entered ‘Chapter 11’ bankruptcy in 2009. After selling off or discontinuing many brands, it emerged as a new company with new management and financial bailouts from both the US and Europe, with a net cost to US taxpayers (to date) of US$12 Billion.

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Thomas (Tom) Johnson, Professor of Accounting and author of the book ‘Profit beyond measure’ wrote in an article on the excellent ‘Lean Edge’ site that “financial results such as revenues, costs and profits are by-products of well-run human-focused processes”.

He goes on to make the following comparison:

“…the Toyota people in Japan who founded and grew the company down to the 1990s saw the company as a disciplined organization of ’employee/suppliers’ whose purpose is to serve ‘customers’ in a way that earns sufficient profit to ensure the long-term survival of the organization. 

…those of us from the West, on the other hand, for the past 30 to 40 years have viewed the purpose of business as making profit, by any means considered legal.

…the contrasting view held by Toyota people who founded and built that company from the 1950s to 2000 considers that a business exists to provide opportunity for humans to exercise their inherent creativity in gainful employment serving needs of other humans. The people who held that view saw the purpose of the business to be continuous improvement of a system designed to enable humans to serve other humans gainfully and sustainably”

It’s interesting to note that there are plenty of organisations around the world (Dignan refers to some in his video above) that have understood the ’cause and effect’ of Toyota’s view i.e. that everyone (including investors) does well if an organisation sets out and truly pursues its purpose, with its long term success being the outcome.

________________________________________________________________

And finally, if we go back to Simon Sinek’s ‘start with why’, he makes some things very clear:

‘Why’ is not about profit…that’s just an outcome:

“By why, I don’t mean to make a profit, that’s a result. By why, I mean what’s your purpose, your cause, your belief? Why does your organisation exist? Why do you get out of bed in the morning and why should anyone care?”

You can’t just state your ‘why’ (your purpose). It actually has to be what you believe! If your actions are about profit over your stated purpose then this evidence will be seen, taken on board and acted upon accordingly:

“…what you do serves as the proof of what you believe.”

People ultimately follow leaders for themselves. If the actions of those leaders do not align with the beliefs of the workers then don’t expect them to follow:

“We follow those who lead, not because we have to but because we want to. We follow, not for them but for ourselves.”

Finally, there’s a really important point implied but not explicitly stated by Simon Sinek: The leaders of an organisation need to provide the environment, through an appropriate management system, that enables the purpose and does not frustrate it.

________________________________________________________________

In summary:

  • You can state a purpose….but you’ve got to actually live it to move towards it;
  • An organisation’s purpose should NOT be ‘profit’, even though this outcome is necessary for the system and those that finance it;
  • If you think it’s the other way around i.e. that you need to state a purpose so as to chase profit, then you are likely to fall a long way short of what you could achieve…and will put your long term survival at serious risk;
  • A focus on short term profits and results for the market will likely destroy unknown and unknowable value.

For those of you who think “what a load of hippy liberal rubbish, of course it’s all about the shareholder”, here’s a really nice quote to consider from Sam Walton (founder of Wal-Mart):

“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”

…how would those shareholders feel if their investment became worthless?

Note: The above raises a ‘big hairy question’ – There are many corporate forms…but which ones help and which ones hinder an organisation’s ability to truly live its stated purpose? This is something that the world’s politicians and financial markets are currently grappling with. Here’s an interesting ‘Economist.com’ article about this.

Starting with ‘Why’

giantknave Brain Farts , ,

Sinke quoteMany an organisation spends a great deal of time and money on the re-branding band wagon. Some outcomes are good, others not so good…and many fit into the ‘huge waste of money’ bucket.

One area that has come up for this  ‘re-fresh’ treatment over the last few years is an organisation’s purpose statement and I suspect that this has a lot to do with the success of the hugely watch-able’ ‘start with why’ TED talk (and related book) by a chap called Simon Sinek back in 2010.

Sinek is a passionate and persuasive orator. If you’ve not watched it before (or if it’s been a while) then I’d highly recommend you spend the 18 mins. to watch it.

Now, what strikes me most about this very insightful talk is Sinek’s comparison between the Wright Brothers and Samuel Pierpont Langley (their main competitor in the flying race).

Two questions I ask myself:

  • Do you think that the Wright Brothers started by crafting a crisp clear ‘Why’ statement, and they then needed to continually look at it to motivate themselves and those around them? I doubt it, they didn’t need to.
  • Do you think things would have been different if Samuel Pierpont Langley had sat down with his corporate advisors* (perhaps at the point that they were struggling to advance) and, after a bit of deep word smith-ing, they had come up with a great ‘purpose’ statement?…because, wow, that now changes everything…erm, NOT!

[* As a quick segue, here’s a wonderful short skit by Dan Heath about what happens when a committee get together to write a corporate statement.]

Don’t get me wrong. I believe that I ‘get’ what Sinek is saying and I agree that, for an organisation to be really successful, it needs to be very clear on its purpose …but there is a chasm between stating (and oft repeating) a catchy ‘purpose’ statement and living and breathing what it means (and removing the obstacles in its path).

There is also a ‘rub’ between an organisation stating a meaningful purpose and it being funded through investors with likely different motives*.

[*I’ve got a post ready to go on this – it will be ‘next cab off the rank’]

Finally, how does an organisation’s fresh and contemporary ‘Why’ statement impact/ fit with/ replace their old purpose statement? It is highly likely that the issue wasn’t with the old one. I think the issue (which remains) will likely be with how the organisation works.

To repeat the end of my recent ‘Principle of Mission’ post:

It doesn’t matter how clearly [any] leader articulates intent if their people don’t want to follow.

Setting out a clear and meaningful purpose is but one (key) part of the overall system. The rest comes down to management’s beliefs and behaviours, and the environment that this creates.

The bit that blew me away from Sinek’s talk is the following:

“Those who [truly] ‘lead’ inspire us, whether they are individuals or an organisation…we follow, not because we have to but because we want to…we follow not for them but for ourselves.”

If an organisation really wants a win/win/win (for employee, customer and investor) then it needs to start with the employees, to provide an environment where they are working towards the purpose*, not for the money but for themselves.

* Addendum: Beware POSIWID.

The “did you just do that?!” analogy

giantknave Brain Farts ,

dinner partySo I had a good conversation the other day. I got talking with a most excellent colleague and he used a wonderful analogy.

Before I explain the context, here’s his analogy:

The dinner party

Picture the scene: you live in a nice house in a leafy suburb. The house next door was recently sold and new neighbours have successfully moved in. You invite them around for dinner and they gratefully accept. Nice.

They arrive, offer up an agreeable bottle of wine and a tasty looking box of chocolates. You take their coats, usher them in, show them around the house a bit and are then seated for the meal.

A nice three course dinner ensues, with good conversation amidst a cheery atmosphere. The plates are cleared away and you escort your guests to the lounge whilst you scamper off to the kitchen to make coffees.

You enter the lounge, coffee and chocolates tray in hand, to find one of your guests crouched in the middle of the room, trousers and pants around his ankles, having a shit on your carpet!

So, here’s the thing: What do you say?!!!

Before you waste your breath, consider the following: If your neighbour doesn’t think there’s an issue with what they’ve just done (which, clearly, they don’t)….then what is the point in saying anything at all? What good will it do?

Bringing it back to your work environment:

Okay, so what on earth has this got to do with work? Here goes…

If you work in an organisation in which ‘management’ constantly tell you that ‘we really care about you’, that ‘we want to empower you’, that ‘you are our most important asset’ and ‘together, we are stronger’…and yet then go and do something which is soooo obviously NOT the right thing to do (i.e. goes completely against the rhetoric that they have been playing on a loop) then…what do you say? And what would be the point in saying anything?

They have metaphorically ‘dumped on your carpet’ and they either don’t get it or do, but don’t care. The first is ignorance, the second is arrogance…and, before you assume the ‘frontal assault idiot’ role it would be a good idea to think about which is the case.

To counter ignorance requires education, which will only truly occur through normative learning .

Arrogance, well, that’s a different thing. It brings to mind the rather nice (and widely applicable) quote:

“Change the changeable, accept the unchangeable, and remove yourself from the unacceptable.” (Denis Waitley)

Can you counter arrogance? You can take the rather hard route of trying to ‘knock them off their perch’ or you can ‘pick up your toys and go play somewhere else’….though, on reflection, most arrogance is likely due to a deeper ignorance.

Reality:

I find that I can’t help myself from saying something when my ‘neighbour shits on my carpet’. I’m not sure what good it does…but I feel better for saying it.

I take the time and effort to rationally explain my problem with their actions…but fully accept the limitations within.

p.s. I’m going to a dinner party tomorrow night! Don’t worry Jonesy – I’ll be on my best behaviour 🙂 

 

The Principle of Mission

giantknave Brain Farts , , , , , , ,

NapoleanSo I’ve written a few posts to date about ‘purpose’.

This post explains a related term, ‘Principle of Mission’, by taking us back through military history (sadly the source of much of our breakthrough learnings).

The phrase ‘Command and Control’ as applied to the common form of organisational management is associated with the military and how they traditionally functioned.

I expect most of you have seen some classic war films/documentaries of a bygone age and you can paint the picture of the following scene in your mind’s eye:

  • A large area of land, perhaps outside a castle/ fortified town or out on the plains;
  • Various units of men drawn up in formations on either side
    • perhaps divided into infantry, cavalry, archers and artillery (where the technology available would depend on the age – from catapults through to cannons);
  • …and a small huddle of officers up on a hill (and a safe distance from ‘the action’), surrounding their General seated on a white stallion.

The General has an objective and a detailed plan of how he is going to achieve it!

“Roll cameras, action”, and we see the General giving orders (Command), watching the melee (perhaps via the help of a telescope), receiving reports ‘from the front’ (Control) and adding to and/or revising these orders.

battle scene

And so to 14th October 1806 and the twin Battle of Jena-Auerstadt , at which Napoleon’s far smaller French force faced the might of the Prussian Army. However, Napoleon won a decisive victory and he did so because he did far less of the commanding-and-controlling thingy and, instead, used a different way of thinking.

In the aftermath, the Prussian military performed what we might call a retrospective to work out how they were so convincingly beaten and what they should learn from this.

Their post-mortem noted that Napoleon’s system provided his officers with the authority to make decisions as the situation on the ground changed and, crucially, without needing to wait for approval through a classical ‘chain of command’. Thus, they could adapt rapidly to changing circumstances.

If a French regiment got stuck in the proverbial mud, there was no wallowing around waiting to see what Napoleon thought they should do about it! Conversely, the Prussians in that same quagmire would be cannon fodder.

In the decades subsequent to the Battle, General Scharnhorst and then Helmut von Moltke built a new Prussian military culture, aimed at leading under conditions of uncertainty. Von Moltke wrote1.:

  • “in war, circumstances change very rapidly, and it is rare indeed for directions which cover a long period of time in a lot of detail to be fully carried out”;
  • “[I recommend] not commanding more than is strictly necessary, not planning beyond the circumstances you can foresee”;
  • “[instead] the higher the level of command, the shorter and more general the orders should be. The next level down should add whatever further specification it feels to be necessary…this ensures that everyone retains freedom of movement and decision within the bounds of their authority.”

And perhaps to the key point: Military orders must always clearly explain their intent i.e. the purpose of the order. This means that anyone carrying them out is focused on the intent and not blinded by any prescribed method.This new military way of thinking has been adopted widely though, perhaps surprisingly, the old command-and-control logic has lingered.

Hence why we get the best selling book ‘Turn the Ship Around!’(2012)2. in which Captain L. David Marquet eloquently writes about how he turned the fortunes of a U.S. Navy Nuclear submarine around by turning followers (his officers and staff) into leaders. A major theme in his story is about enabling his staff to think in terms of intent instead of merely waiting for, and following orders.

“What happens in a top-down culture when the leader is wrong? Everyone goes over the cliff.” [Marquet]

Bringing this together, The Principle of Mission is for leaders to describe the intent of the organisation’s mission, clearly communicate why it is being undertaken and then let the people get on with working out how to achieve it …and this is instead of, not as well as, making highly detailed plans and then controlling their execution.

And so to organisations:

We aren’t ‘in the army now’ but we all work with organisations that can learn from the above. We should be clear on each of our value-streams and their (customer-driven) purpose.

Such purposes set out clear intent to the system and its people tasked with delivering it.

…and a reminder that profit is not the purpose (or at least it shouldn’t be).

The role of the leader:

John Seddon wrote a fascinating book in respect of the UK public sector called ‘The Whitehall effect’3. In his chapter ‘Getting a focus on purpose’ he writes that:

“Politicians* should get out of management. But they should have a lot to say about purpose….

[this] means a shift away from the central dictation of operating specifications such as targets, standards and activity. Instead, service leaders must be free to make responsible choices about the measures that will best enable them to achieve the purpose…Freed from the obligation to deploy the paraphernalia of [dictated methods], it will be up to the service leaders to choose how they improve their services against purpose, placing value on ‘better practise’ which is dynamic (anything can be improved) rather than ‘best practise’ [Ref. Benchmarking] which is static (as well as misleading). They will be guided by the rudder of efficacy, not the rudder of compliance – and they will be judged by the same token.”

* The Politicians in this quote are the leaders of what has been termed ‘UK Plc’. I am asking leaders of organisations to substitute themselves for the politicians in this quote.

Thus, the leader-service manager feedback question changes drastically:

  • From: “Have you done what I told you to do?”
  • To: “How do you know how well you are doing in achieving the (customer driven) purpose of the service?”

This is a radical shift and opens the way for true adult – adult coaching conversations.

An aside: Steering committees

I have seen a fair few high level steering committees over the years. Most fall into the command-and-control trap. Picture the scene:

  • A Project Manager reports back to the steering committee;
  • The committee discuss what is before them and, using their opinions, dictate how the Project should proceed;
  • The Project Manager is uncomfortable with this outcome but chooses to carefully manage his stakeholders (i.e. doff his cap to them)…so he takes the committees ‘decisions’ back to the team;
  • …and the team quickly and clearly explain why following such a path would be quite mad;
  • …and so the Project Manager has to commence an impossible juggling act.

In short: Committees should not dictate the ‘how’, but they should be absolutely clear on the ‘what’* and ‘why’ (the principle of mission).

* this is referring to a target condition, not a target date.

A HUGE clarification:

It doesn’t matter how clearly Napoleon, or any other leader, articulated intent if their people don’t want to follow.

Setting out a clear and meaningful purpose is but one (key) part of the overall system. The rest comes down to management’s beliefs and behaviours, and the environment that this creates.

…and finally, if you like the military discussion above, here’s a link to a short and highly related post called Why don’t you just written by ‘The Lean Thinker’.

Notes

  1. Source of quotes: von Moltke’s ‘Guidance for Large Unit Commanders’ as quoted by Stephen Bungay in his book ‘The Art of Action’.
  2. Marquet’s book is an excellent, easy read.
  3. For those of you who don’t know too much about the UK, Whitehall is a road in central London on which most of the government departments and ministries reside. When someone talks about ‘Whitehall’ they are usually referring to the centre of the British government and its civil servants.

The catalyst for writing this post was reading about the term ‘Principle of Mission’ within the book ‘Lean Enterprise’ by Humble, Molesky and O’Reilly.

Unknown…and unknowable

giantknave Brain Farts , , ,

so much more than a bagSo it’s the beginning of an ‘Improvement through Systems Thinking’ course that I facilitate and I am asked a question from one of the attendees:

“What is the value, as in ‘return on investment’ (ROI), in me attending this training?”

Now, that’s a (sadly) all too common a question when someone working within a command-and-control environment has to guarantee a short term payback BEFORE they are authorised to spend time towards studying and improving their system.

Here’s my response:

1) It isn’t a training course. It is education, aimed at making you curious. No more and no less; and

2) The ‘value’ is unknown….and unknowable!!!

Sure, I can (and will) do my best in designing and delivering this course against its purpose but:

  • I cannot know (let alone dictate) which of you will speak to who during and afterwards, and about which bits. I cannot know when such conversation(s) will occur (tomorrow, next week, next month…or even after someone leaves for another organisation!) and I cannot know how the system will enable (or constrain) as and when these conversations eventuate; 
  • and perhaps the nub of it is that the ‘value’ is in YOUR hands to decide, not mine! YOU decide whether you will explore or ignore. YOU decide whether you are too comfortable in your current state or whether you desire growth. Not I.

…BUT that doesn’t make this a problem. It’s just ‘how it is’, whether you like it or not.

There is massive ‘organisation-changing’ value to be had…but it is for you to decide whether you pursue it.

The ‘ROI as permission to act’ view of the world is such a poor way to seek, and achieve, improvement.

I am reminded of a fabulous scene in the classic ‘Love Actually’ film between Rowan Atkinson and the late Alan Rickman: How much is that necklace there? (It’s only 3 mins. long and well worth watching 🙂 )

A course can be ‘so much more than a bag’…but that depends on you.

Oversimplification

giantknave Brain Farts , , , , , , , , ,

!cid_image001_png@01D18034So it seems that many an organisation repeats a mantra that we must “simplify, simplify, simplify”…they accompany this thrice repeated word with rhetoric that implies that this is so blindingly obvious that only a fool would query this!

As such, anyone questioning this logic is likely to hold their tongue…but I’ll be that fool and question it, and here’s why:

It’s too simple!

Here’s where I mention the ‘Law of requisite variety’ which was formulated by the cyberneticist1 W. Ross Ashby in the context of studying biological systems. Stafford Beer extended Ashby’s thinking by applying it to organisations.

Now, rather than stating Ashby’s technical definition, I’ll put forward an informal definition that I think is of use:

“In order to deal properly with the diversity of problems the world throws at you, you need to have a repertoire of responses which is (at least) as nuanced as the problems you face.” (What is requisite variety?)

!cid_image002_png@01D18034

Using the diagram above, let’s say that the problem types on the left (shown by different coloured arrows) represent the different types of value demands from our customers.

Let’s say that the responses on the right are what our system* is designed to cope with (* where system means the whole thing – people, process, technology – it doesn’t refer merely to ‘the computer’).

We can see that our system above is not designed to cope with the red arrows and incorrectly copes with some of the yellow arrows (with an orange response)….the customers with these value demands will be somewhat disappointed! Further, we would waste a great deal of time, effort and money trying to cope with this situation.

What on earth are you on about?!

“Management always hopes to devise systems that are simple…but often ends up spending vast sums of money to inject requisite variety – which should have been designed into the system in the first place.” (Stafford Beer)

Many large organisations engage in ill thought out and/or overly zealous ‘complexity reduction’ initiatives (incidentally, system replacement projects* are corkers for this!) that strip out more than they should and the outcome is unusable and/or hugely harmful towards satisfying customer value demands…which ends up creating un-necessary complexity as the necessary variety is ‘put back in’ via workarounds and ugly add-ons and patch-ups.

(* Large public sector departments have been excellent at this….often scrapping multi-million $ projects before a single live transaction gets into a database.)

Note: for readers aware of the ‘Lean Start-up’ thinking, you might cry out that this appears to go against the Minimum Viable Product (MVP)/ experimentation point…but it doesn’t…in fact it supports thinking in terms of target conditions rather than merely stating ‘make it simple’ objectives and setting related arbitrary targets.

Standardisation?

You might think that, because service demand is infinitely variable 2, then I am suggesting that we need to build infinitely complex systems that can cope with every eventuality with standardised responses. Well, no, that would be mad…and impossible.

In service, we can’t hope to know every ‘coloured arrow’ that might come at us! Instead, we need to ensure that our service system can absorb variety! This means providing a flexible environment (e.g. guidelines, not ‘straight jacket’ rules), and empowering front line staff to ‘do the right thing’ for the specific variety of the customer’s demand before them, and pulling appropriate expertise when required.

Standardisation in service is not the answer.

Cause and Effect

Don’t confuse cause and effect. Simplification should not be the goal…but it can be a very agreeable side effect.

“To remove waste [e.g. complexity], you need to understand its causes….if the system conditions that caused the waste are not removed, any improvements will be marginal and unsustainable.” (John Seddon)

If you think “We’ve got too many products and IT applications…we need to run projects to get rid of the majority of them!” then ask yourself this: “Did anyone set out specifically to have loads of products and IT applications?” I very much doubt it…

You can say that you want fewer products, less technology applications, less complex processes…less xyz. But first, you need to be absolutely clear on what caused you to be (and remain) this way. Then you would be in a position to improve, which will likely result in the effect of appropriate simplification (towards customer purpose).

If you don’t understand the ‘why’ then:

  • how can you be sure that removing all those products and systems and processes will be a success? and
  • what’s to stop  them from multiplying again?

The goal should be what you want, not what you don’t want

“If you get rid of something that you don’t want, you don’t necessarily get something that you do want…improvement should be directed at what you want, not at what you don’t want.” (Russell Ackoff)

The starting point should be:

  • studying your (value stream) systems and getting knowledge; and then
  • experimenting towards purpose (from the customers point of view) , whilst monitoring your capability measures

The starting point is NOT simplification.

A classic example of the simplification mantra usurping the customer purpose is where organisations force their customers down a ‘digital’ path rather than providing them with the choice.

  • To force them will create dissatisfaction, failure demand and the complexity of dealing with it;
  • To provide them with choice will create the simplicity of delivering what they want, how they want it…with the side effect of educating them as to what is possible and likely moving them into forging new habits (accepting that this takes time).

In conclusion

So I’d like to end on the quote that I have worn out most over my working life to date:

“Make everything as simple as possible, but no simpler.” (attributed to Einstein)

The great thing about this quote is that it contrasts ‘relative’ with ‘absolute’. “As simple as possible” is relative 3 – it necessitates a comparison against purpose. “Simple” is absolute and, as such, our pursuit of simplification for its own sake will destroy value.

Thus, the quote requires us to start with, and constantly test against, customer purpose…and the appropriate simplicity will find itself.

Notes:

  1. Cybernetics: the science of control and communication in animals, men and machines. Cyberneticians try to understand how systems describe themselves, control themselves, and organize themselves.
  2. Infinite variability: We are all unique and, whilst we will likely identify a range of common cause variation within service demand (i.e. predictable), we need to see each customer as an individual and aim to satisfy their specific need.
  3. There’s probably an Einstein ‘relativity’ joke in there somewhere. 

Pick me, pick me!

giantknave Brain Farts , , , ,

Thierry HenryI have an image in my head: I’m a small school boy on the playing fields at lunchtime. We are going to have a kick-around and, with the two most popular boys self-installed as Captains, me and my mates are all lined up trying to look good, with our eyes desperately pleading ‘pick me, pick me’…no one wants to be left till the end, unwanted and discarded.

So, on to the mighty world of organisational strategy. There are two very different end points on the strategy spectrum. These have been labelled as:

  • Strategy as Fit; and
  • Strategy as Stretch.

Here’s a quick explanation:

Strategy as Fit:

  • The idea that an organisation analyses its external environment (including the forces* of Customers, Suppliers, Competitors and Substitutes) and then tailors its strategy to fit into this.
  • This then requires the necessary resources to be identified, obtained (if not already in place) and allocated
  • This (rather traditional) approach to strategy involves:
    • Market segmentation and positioning as against the competition and substitutes;
    • Logical hierarchical control structures, breaking the organisation into component parts of the so-called ‘value chain’;
    • Formal ‘Position Descriptions’ (PDs) in which roles are explicitly specified and then people fitted to them;

and when things change (as they frequently do)

  • Top-down ‘re-fits’, where defunct roles are disestablished and shiny new roles created…with people as pawns in this game (“Quick, everybody line up against the wall to re-apply for one of our shiny new PDs, you lucky things! I’ll be Captain making the picks”)

* ‘Strategy as Fit’ harks back to the original strategy work of the highly respected Professor Michael Porter. His ‘Porters 5-forces’ model is ‘page 1 of Strategy 101’.

Strategy as Stretch:

  • The alternative idea that an organisation has a current set of resources and, rather than be dictated to by assumptions about, and posturing within, the external environment, the organisation creates an internal environment in which their people thrive and grow – they voluntarily stretch themselves;
  • The idea here is to leverage existing resources such that they achieve their potential: developing themselves, innovating, experimenting, collaborating…moving the organisation in new and unpredictable ways;
  • It’s not about roles (and PDs), it’s about human beings – who they are and what they can become;
  • The question changes:
    • From: what resources do we need to achieve what we’ve decided
    • To: where can we go with the resources we’ve got…where this will unfold and surprise as time passes

* ‘Strategy as Stretch’ comes from the work of Professors Gary Hamel and C.K. Prahalad. They wrote a 1994 book called ‘Competing for the Future’ in which they talk of stretch and resource leverage.

You can see that ‘fit’ will be preoccupied with doing things efficiently whereas ‘stretch’ will be constantly focused on being effective. Constraining vs. liberating.

So what about Dave?

Okay, so let’s see if I can make this a little bit more meaningful/ relevant with a hypothetical example. If you have a worker, let’s call him ‘Dave’, with:

  • Capability: He has a high level of skill in his chosen profession and clearly wants to learn more – both deeper and wider;
  • Experience: he has worked for the organisation for many years, knows who’s who, knows how the place works, knows what’s been done in the past, knows what worked, what didn’t and gained some valuable insights in the process;
  • Desire: he clearly wants to deliver value to the customers of the organisation, and is passionate about doing so
  • People-skills: he has natural social skills and can relate to and empathise with people, collaborate and contribute.
  • Professionalism: he is highly respectful of his customer and peers.

...then you’d be delighted!!! Dave is clearly a ‘good guy to have around’ – I’ll have a dozen please 🙂 . You’d be absolutely nuts to actively ‘get rid of him’!

So, let’s see how our two strategic logics deal with ‘Dave’ when the work that he has been doing to date appears to be no longer required.

Fit:        

  • “Sorry Dave, the PD that you were allocated to no longer exists…so we are going to have to ‘disestablish’ that PD…
  • ..but there’s some collateral damage from this ‘allocation issue’ – erm, you’ve no longer got a job. Sorry about that…but good luck though.
  • Now, yep, would love to stop and chat but I’ve got to rush off to interview people to allocate into our brand spanking new PDs – exciting stuff eh!”

Stretch:

  • “Okay Dave, we think your work is just great, but as you know things have moved on…we need to work out how to leverage ‘you’ (who you are and who you can be) and what your next challenge is going to be!
  • …you’ve got some ideas as to how you want to develop? You’ve been thinking about them for a while? Excellent – let’s hear them and work out how we best support you.
  • …great idea. That should be very beneficial for our customers (and therefore our organisation). What do you need to get going?!”

In short: If you’ve got a Dave, you’d be mad to drop him from your team!

Pick Dave every time: always make a position for him so that he can fully and freely express himself for the undoubted and ongoing benefit of the team!

…and look after Dave: Dave is a person, not a ‘PD filler’. Beware Top-down ‘refits’ and their massive long term effects on morale.

In summary:

If management think in terms of ‘fit’, then Daves are regularly shown the door as collateral damage from the resource allocation merry-go-round… not that management would know this: “Dave? Dave who?”

Of course, if management change to thinking ‘stretch’ then they will be astounded as to how many Daves they actually have (but didn’t appreciate because they were lying dormant)…and can leverage them to the delight of every Dave, and for the long term good of the organisation and its customers.

“…the only sustainable competitive advantage available to a firm in a fast-changing world (especially in a service business) lies with its people – especially their creativity, insights, and judgement – a model in vivid contrast to the numbers driven [inhumane ‘fit’] alternative so prevalent elsewhere.” (Source: ‘Beyond Budgeting’ referring to Dr. Jan Wallander of Handelsbanken)

Note: I write this post for all the Daves throughout my career that have been shown/ pushed through the revolving door at ‘re-organisation time’ (wisdom out, ‘fresh meat’ in, yet the system remains the same 😦 ).

Also, I don’t mean to be sexist – I just like the name ‘Dave’. I had a cat called ‘Dave’ for this same reason. I should add that I have seen many a female ‘Dave’ walk out the door too…I shall (from now on) refer to them as ‘Bob’…but then you’d have to be a Blackadder fan to get that 🙂

p.s. The picture is of Thierry Henry – you’d have been mad not to have picked him for your team.

“So, tell me about yourself”

giantknave Brain Farts , , , ,

InterviewA good friend of mine got talking to me about interview questions the other day.

She was having a laugh at the ‘creative’ questions that many interviewers can dream up such as “tell me what makes you special!”

I replied that I think the worst interview question is the “what are your greatest weaknesses”…and then I got thinking about why this is so.

Now, an interviewer can dream up all sorts of weird and wonderful questions that will allow you the space to sell yourself (if you are willing and able to) but this ‘weakness question’ is different. I suspect that it makes us all squirm because it causes a huge moral dilemma:

  • you want to be yourself, to be genuine, to be open and honest….

BUT

  • you also want the job!

So you’ve been put in a rather tight spot!

I’ve read all sorts of ‘clever’ (cheesy) responses. There’s plenty of advice on the web to answer this tricky conundrum, but they all try to do the same thing: get around the question rather than being brutally honest.

So, why am I bringing up this dastardly interview ‘weakness’ question?

Well, because I realised that this is an excellent parallel to the (ir)regular performance management meeting.

How so?

If you are part of a ‘set personal objectives – rate performance against – provide contingent reward’ Performance Management system then you too are in a rather tight spot.

Let’s imagine that you are in your annual performance review meeting:

  • on the one hand, you have a manager before you who has the job of developing you and, to do this, needs to truly know about how things are for you. They need genuine, open and honest ‘warts and all’ feedback;
  • on the other hand, this same manager has to judge you, which requires an interrogation of the available evidence and the scoring of it, as compared to your peers. You need to sell yourself.

What’s wrong with this?

These two ‘management’ roles are diametrically opposed. A manager cannot be judge and counsellor/coach at the same time.

If you were to lie down in a psychiatrist’s chair, you can expect that he/she will go to great lengths to put you at your ease, make clear that everything spoken is private and that no judgement of you will take place….and even then I suspect that it would take multiple visits before you truly opened yourself up….and in so doing, you provide the knowledge and insights required for you to develop.

Now, I know you won’t lie on a reclining chair in a performance review meeting (at least I don’t) but a similar environment of trust is required for a manager to truly help you (and, by extension, the organisation).

“When the person to whom you report decides how much money you will make (or what other goodies will be awarded to you) you have a temptation to conceal any problems you might be having. Rather than asking for help, which is a pre-requisite for optimal performance, you will be apt to spend your energies trying to flatter that person and convince him [or her] that you have everything under control. Moreover…you will be less likely to challenge poor decisions and engage in the kind of conflict that is beneficial for the organisation if you are concerned about losing out on a reward. Very few things are as dangerous as a bunch of incentive-driven individuals trying to play it safe.” (Alfie Kohn)

If you know that you are being judged (with a carrot or stick at the end of this) then you are going to be extremely careful (and selective) about what you do and say. You will likely:

  • seek, sift through and provide only positive evidence (choosing feedback wisely and carefully omitting what doesn’t fit your wishes);
  • talk up what has occurred, and you role within (it was all ‘because of me’!);
  • defend your position when it is challenged (presenting a strong case as to why something or someone else was to blame);
  • keep quiet about areas you have struggled with;
  • …[and so on – no doubt you can expand]

None of this is to call you a ‘bad person’…you would be merely playing your part in the game of survival that has been put before you.

You might get your carrot, but your organisation will miss out on what it really needed to know…and the game will continue on to its next round.

A better way

Wouldn’t it be just fantastic if you were willing to ‘share it all’ with your manager, and to do so without any salesperson’s spin. How about: where you got it wrong; where you didn’t understand; where you don’t agree, where you feel weak and exposed, where you’d really like some help… where it was actually a joint team effort (not just ‘me’)…basically what is really going on!

Even better, how about being willing to have these conversations as and when the need arises (and not, say, 6 months later in some staged meeting).

This is possible….but only with a different way of thinking.

Here’s where I repeat Alfie Kohn’s 3-step approach that I have already shared in an earlier post (The Chasm):

  1. abolish incentives: remove extrinsic motivators (incentives, competitive awards….);

“pay people well and fairly…then put money out of their minds.” (Kohn)

  1. then re-evaluate ‘evaluations’: move from formal time-batched judgement events to continual 2-way conversations divorced from the issue of compensation;
  1. then create the conditions for authentic motivation:
    • Collaboration: across the horizontal value stream
    • Work content: make it interesting
    • Choice: allow people to experiment and learn

There’s a reason for the order of these steps: True organisational success is unleashed by point 3…but, most importantly, is held back (even quashed) without first attending to point’s 1 and 2.

Irony

There are some people who are willing and able to say exactly what they think in a performance management review*, which they do because they have a desire to make their organisation a better place to work (for them, and everyone else)….and then risk the consequences of low(er) ratings and a poor ‘reputation’ with their manager (as in “s/he’s a trouble maker that one!”)…which may even then go on to be ‘shared’ with others in the hierarchy.

This is ironic madness. I favour any management system that encourages and supports open-ness and honesty that is devoid of personal agendas.

* I’m not suggesting that there is anything particularly great about such people. Such willingness and ability may come down to personality and economic circumstance allowing…which is not so for most.