Memo to ‘Top Management’ – Subject: Engine Technology

I’ve just been searching for a post that is hugely relevant to a recent conversation, and have found that it was an old piece that didn’t get published onto this blog…so here it is:

Jet engine“Management thinking affects business performance just as an engine affects the performance of an aircraft. Internal combustion and jet propulsion are two technologies for converting fuel into power to drive an aircraft.

New recipes for internal combustion can improve the performance of a propeller-driven airplane, but jet propulsion technology raises total performance to levels that internal combustion cannot achieve. So it is with management thinking.

Competitive businesses require jet (even rocket!) management principles. Unfortunately, internal combustion principles still power almost all management thinking.” (H. Thomas Johnson)

And so Johnson nicely compares and contrasts the decades old ‘command and control’ management system with a new ‘systems thinking’ way.

Let’s take incentives as an important example:

You report to a manager, who reports to a manager, who…etc. You have ‘negotiated’ some cascaded objectives and you will be rated and then rewarded on your ‘performance’ in meeting them. Sound familiar?

Here are the fundamental problems with this arrangement:

  • Obey and justifyYou will tell your manager what you think he/she wants to hear, and provide tailored evidence that supports this, whilst suppressing that which does not;

  • If you are ‘brave’ and tell your manager something that they might not like, you will do so very very carefully, like ‘walking on eggshells’…and, in so doing, likely de-power (i.e. remove the necessary clout from) the message;

  • You realise that it’s virtually suicidal to ‘go above them’ and tell your manager’s manager the ‘brave’ thing that they should hear…because you fear (with good reason) that this will most likely ‘come back to bite you’ at your judgement time (when the carrots are being handed out);

  • You are locked into a hierarchy that is reliant on a game of ‘Chinese whispers’ up the chain of command, with each whisperer finessing (or blocking) the message to assist in the rating of their own individual performance;

  • Each layer of management is shielded (by their own mechanism) from hearing the raw truth and, as such, they engineer that they ‘hear what they like, and like what they hear’.

…and therefore this system, whilst fully functioning, is perpetually impotent! It has disabled itself from finding out what it really needs to know.

“Hierarchies don’t like bad news…. bad news does not travel easily up organisations” (John Seddon)

If you’ve been in such a system and HAVE broken one of the rules above through your passion to make a real difference for the good of the organisation you work for (or perhaps worked!), then you’ve probably got some scars to show for it.

If you’ve always played it safe, then this is probably because you’ve seen what happens to the others!

The ‘Bottom line’ for ‘Top Management’:

If you want to transform your organisation, change ‘engine technology’! Tinkering with your existing one is simply not going to work.

  • Managers should not be rating the performance of individuals. Rather, they should understand what the system is preventing the individual from achieving…and then work with them to change that system to release their untapped potential;

  • Managers should not be incentivising individuals to comply. Rather, they should be sharing the success of the organisation with them. (These are very different things!)

Neither of these fundamental changes is in the gift of ‘middle management’ – they belong to those that determine the management system.

… and so, if (and this is a big ‘if’) ‘top management’ want to know the raw truth (‘warts and all’) they must constantly remove, and guard against, system conditions (e.g. incentives, performance ratings) that would prevent the truth from easily and quickly becoming lucid and transparent.

Afterthought, to counter a likely retort from ‘Top management’:

I have often (professionally) provided well intended feedback to ‘management’ as to what’s actually ‘happening out there’, particularly when I believe that they may not be aware of this. Many an Executive has derived great worth from this feedback (and thanked me accordingly).

This isn’t saying that I’m always right, or that I know everything. Obviously I’m not, and I don’t. But I do know what I see and hear.

However, there has been a subset of deeply command-and-control executives that confidently respond with “no Steve, you are wrong – that’s not the case at all. My people tell me exactly what’s happening…and there’s no problem here”.

I find this interesting (sometimes amusing, but mostly disappointing).

A manager can never be sure that people are being totally open and honest with them…but they can constantly look for, and understand, what mechanisms and practices would put this desired feedback in doubt or at risk….and then tirelessly work to remove these system conditions, for the good of all.

Footnote: I wrote this post before I wrote ‘Your Money or your Life!’…which considers the question as to whether ‘Top management’ in large corporates CAN change.

Laugh…or scream!!!

screamerSo I was passed a ‘McKinsey Quarterly’* article today by a good colleague of mine. It was titled ‘Ahead of the curve: the future of performance management’.

(*For those of you who haven’t heard of them, McKinsey is a large, well established global firm of Management Consultants)

Reading it made me want to laugh and scream in equal measure!

The glossy journal starts by referring to the “worst kept secrets” in respect of the traditional performance management process i.e. the well known issues with the process that virtually all organisations grapple with.

It then goes on to suggest a number of ‘aha’ insights and then ideas as to what to do about it.

Humble pie please…even a small slice?

humble pieI find it ironic when any consultancy writes such a piece in a style that (in my view):

  • suggests that it is bringing the ‘world of management’ something new and amazing (in a “listen to us, we know what we are talking about!” way);
  • …and yet completely side-steps* that it has likely made huge $$$ out of decades of pushing and propping up the exact thing that they now seemingly criticise;
  • …dressing up what it sets out as ‘key insights’ as apparently new findings, whilst ignoring that these have been championed by ‘giant’ voices all along (McGregor, Herzberg, Deming, Kohn, Scholtes, Seddon, …and on and on); [I seem to be repeating myself! – perhaps this McKinsey article is just late to the ‘performance management is dead’ party?]
  • …and even then, the narrative misses the ‘fundamental point’. It isn’t the people that we should be rating – it is the capability of the systems that they work within (see below).

* Big consultancies have ridden the ‘cascaded objectivesperformance managementincentives’ band-wagon for years. We should be suitably cautious when considering what they now have to say.

I’m all for learning and growth, but I’d like some modest acknowledgment when the supposed teacher is attempting to lecture on something that appears to go against their previous decades of ‘wise counsel’.

“Answers are emerging”

The McKinsey authors declare in their article that “answers are emerging” in respect of how to change the performance management process, and then go on to talk about what some organisations are experimenting with (including the likes of GE, Microsoft, Neflix).

Now, I’m fine with exploring what others are doing, why and what their outcomes are, but why are these labelled as ‘answers’? Just because someone is doing something doesn’t make it an ‘answer’. There will be other organisations doing the opposite.

The basic problem (for me) with the McKinsey article is that it isn’t built around any fundamental consideration of:

  • What a system is, and why this matters;
  • What effects system conditions will have on people (and their supposed performance within that system);
    • in particular the effects of ‘command and control’ management
  • Why the system is far more than the sum of the parts and so it isn’t about individuals, but about the amazing and often unexpected outcomes that arise when unique individuals collaborate across value streams.

Looking at what other supposedly good and successful organisations have done doesn’t provide ‘answers’ (though it might provide ideas to experiment with for yourselves)

Beware the narrative fallacy: “Turning a sequence of events into a story in an attempt to explain the outcome…this is arguably how methodologies are born.” (‘The Lean Enterprise’ referring to Nasim Taleb’s definition).

Correlation does not equal causation. After all, if we looked at successful organisations a decade ago, we might easily construct an ‘answer’ based around performance management and incentives i.e. the exact opposite.

Things that I agree with

It’s not that I dislike what Google, Microsoft and many others are doing. I like a lot of what I hear about. However, I often don’t like how IT organisations, consultancies and what I perceive as their ‘industry bodies’ (e.g. Gartner, Forrester) write about it.

The McKinsey article includes references to the following highly agreeable points:

  • Severing the link between evaluation and compensation, though it doesn’t really explain the clear logic as to why;
  • Moving to frequent informal ‘on the job’ feedback discussions and a coaching style of management, though:
    • it doesn’t consider that those currently in the management hierarchy likely got there using ‘hero management’ and require the necessary skills to coach; and
    • it implies that coaching is about the manager providing feedback and focus (i.e. knowing the answer and imparting this knowledge to the worker). This is NOT coaching – coaching is helping the worker through their own problem solving ‘at the gemba’, not (as Mike Rother often jokes) getting them to successfully “guess what’s in your head”.
  • ‘Finding meaning in your work’ is what people want most* without making any comment of the Management Consulting industry’s role since the 1950’s in moving organisations towards ‘management by the numbers’ and economies of scale specialisation, centralisation, outsourcing, automation…in short: destroying the meaning of work!

(* I must admit to muttering a loud “no sh1t Sherlock!” when I read the bit in the McKinsey article that draws on ‘recent research’ that comes to this unsurprising conclusion)

‘Collecting data on people’

The article turns to “getting data that matters”, where this refers to collecting data about individuals and their ‘performance’. And so it turns to using technology to assist. It puts forward tools that people can use to automate the collection of real-time data on their colleagues, suggesting that this will “free up time and make the information “more credible”.


McKinsey app piccieI hope McKinsey won’t mind me reproducing here the‘exhibit’ within their article (McKinsey: if you do then please let me know – I’ll remove it and let the readers know this)

I have a picture in my head of the attendees at every presentation, project meeting, workshop etc. with their heads down, teenager-like, constantly using an ‘app’ to rate aspects of the facilitator’s performance as they arise.

Further, I can almost feel the dysfunctional behaviours occurring: People becoming incredibly careful about what they do and say, so as to get a ‘good score’…and avoid a bad one. It will turn us into performing monkeys, all trying to ‘play it safe’!

Facilitators need to retain the ability to professionally say things that make people uncomfortable, to question the status quo, to challenge conventional thinking…and not fear being immediately marked down for it.

Sod the facilitator’s supposed ‘performance’…I’d rather attendees looked up and collaboratively engaged with what he or she is saying!

“But they are engaging with you Steve, they’re busy rating you and providing valuable feedback 🙂It’s not the facilitator that needs rating, it’s the system that ‘we’ (the facilitator and audience) are trying to improve!

Now, before anyone thinks otherwise, of course I want valid feedback so that I can improve…but I want to work in an environment in which everyone is relaxed and comfortable with each other, and therefore such feedback is naturally volunteered, in a 2-way conversation. I find it funny that we, as society, often lament ‘the youth of today’ seemingly not able to interact with each other…and yet here’s the wider IT industry (the hungry Great White shark) trying to sell us down the same path.

If you want an example of what technology has done to us, look at email…we used to pick up the phone, even walk to people’s desks!!!

Of course technology may assist…but let’s not set this up as ‘the answer’. Let’s ONLY pull it towards us once we understand the underlying problem(s) and work out what we need to do about it.

“Ahead of the curve”

Near the end of the article, the authors eulogise that: “Companies in high-performing sectors, such as technology, finance and media, are ahead of the curve in adapting to the future…it’s no surprise that organisations in these sectors are pioneering the transformation of performance management. More companies will need to follow – quickly. They need to shed old models…and liberate large parts of the workforce…”

This made me belly laugh!

  • What about all those Japanese organisations (from Toyota onwards)?
  • What about all those American and European manufacturers that learned from Deming and Toyota?
  • What about all the Scandinavian organisations (like Handelsbanken) that have been thinking this way for decades?
  • What about the ‘Beyond Budgeting’ round table?
  • What about all those public-sector and health organisations that are embracing Lean Thinking and/ or the Vanguard Method?
  • …and likely many many more groups you could name.

Hardly “ahead of the curve”…more like laggards! It is arguably the likes of GE and Microsoft (often in the service sector and/or often American-centric) playing catch-up in spite of what those big consultancies (and many an MBA programme) have been peddling towards them for all these years.

…and how does the ‘article’ end?

The McKinsey article states that “It’s time to explore tools to crowd source a rich fact base of performance observations.”

Yep, that’s right folks, it would appear to be simply another case of an ‘expert’ consultancy dressing something up to create their next implementation revenue stream.

Let’s not ‘explore tools’. Let’s get rid of ideologies and, instead, get to the theory underneath…and then experiment with a new management system.

Let’s move:

  • from management attempting to control, judge and bribe their people (with whatever the current cool methods and ‘tools’ happen to be);
  • to management working with their people to study, understand, and change the system that (together) they work within and then sharing the results.

To quote Deming:

“95% of the reasons for failure to meet customer expectations are related to deficiencies in the system…rather than the employee…

…the role of management is to change the system rather than badgering individuals to do better.”

…now you understand why I didn’t know whether to laugh or scream. You’ve probably guessed that, on balance, I’m screaming.

To McKinsey: In the seemingly unlikely event that you are reading this:

  • I know that you are no different to all the others (I’m not singling you out); and
  • I recognise that you are a business trying to earn money (and that you aim to do this ethically)

…but I hope that you have the good grace to ponder on my thoughts.