Peter Scholtes

Double Trouble

giantknave Brain Farts , , , , , , ,

Double troubleThere’s a lovely idea which I’ve known about for some time but which I haven’t yet written about.

The reason for my sluggishness is that the idea sounds so simple…but (as is often the case) there’s a lot more to it. It’s going to ‘mess with my head’ trying to explain – but here goes:

[‘Heads up’: This is one of my long posts]

Learning through feedback

We learn when we (properly) test out a theory, and (appropriately) reflect on what the application of the theory is telling us i.e. we need to test our beliefs against data.

“Theory by itself teaches nothing. Application by itself teaches nothing. Learning is the result of dynamic interplay between the two.” (Scholtes)

Great. So far, so good.

Single-loop learning vs. Double-loop learning

Chris Argyris (1923 – 2013) clarified that there are two levels to this learning, which he explained through the phrases ‘single-loop’ and double-loop’1.

Here are his definitions to start with:

Single-loop learning: learning that changes strategies of action (i.e. the how) …in ways that leave the values of a theory of action unchanged (i.e. the why)

Double-loop learning: learning that results in a change in the values of theory-in-use (i.e. the why), as well as in its strategies and assumptions (i.e. the how).

That’s a bit of a mouthful – and (with no disrespect meant) not much easier to comprehend when you read his book!2

If you look up ‘double loop learning’ on the wonders of Google Images, you will find dozens of (very similar) diagrams3, showing a visualisation of what Argyris was getting at.

Here’s my version4 of such a diagram:

Double loop 1

You can think about this diagram as it relates either to an individual (e.g. yourself) or at an organisational level (how you all work together).

Start at the box on the left. Whether we like it or not, we (at a given point in time) think in a certain way. This thinking comes about from our current beliefs and assumptions about the world (and, for some, what might lie beyond).

Our thinking guides our actions (what we do), and these actions heavily influence5 our performance (what we get).

And so to the ‘error’ bit:

“Organisations [are] continually engaged in transactions with their environments [and, as such] regularly carry out inquiry that takes the form of detection and correction of error.” (Argyris & Schon)

We are continually observing, and inquiring into, our current outcomes – asking ourselves whether we are ‘on track’, or everything is ‘as we would expect’ or perhaps whether we could do better. Such inquiry might range from:

  • subconscious and unstructured (e.g. just part of daily work); right through to
  • deliberate and formal (such as a major review producing a big fat report).

Argyris labels this constant inquiry as the ‘detection of error’. The error is that we aren’t where we would want to be, and the correction is to do something about this.

Okay, so we’ve detected an error and we want to make a corrective change. The easiest thing to do is to revisit our actions (and the strategies that they are derived from), and assess and develop new action strategies whilst keeping our underlying thinking (our beliefs and assumptions) steadfastly constant. This is ‘single-loop’ learning i.e. new actions, borne from the same thinking.

I reflect that the phrase ‘the more things change, the more they stay the same’ fits nicely here:

If the reason for the ‘error’ is within your thinking, then your single-loop learning, and the resultant change, won’t work. Worse, you will re-observe that error as it ‘comes round again’, and probably quicker this time…and so you make another ‘action’ change….and that error keeps on coming around. You have merely been making changes within the system, rather than changing the system.

A previous post called ‘making a wrong thing righter’ demonstrates this loop through the example of short term incentive schemes, and their constant revision “to make them even better”.

So, the final piece of the diagram…that green line. Many ‘errors’ will only be corrected through inquiry into, and modification of, our thinking…and, if this meaningfully occurs, then this would result in ‘double-loop’ learning – you would have changed the system itself.

Right, so that’s me finished explaining the difference between single-loop and double-loop learning…which I hope is clear and makes sense.

You may now be thinking “great, let’s do double-loop learning from now on!”

…because this is how most (if not all) those Google Image diagrams make it look. I mean, now you know about it, why wouldn’t you?

But you can’t!

The bit that’s missing…

Unfortunately, there’s a wall. Worse still, this wall is (currently) invisible. Here’s the diagram again, but altered accordingly:

Double loop 2

Right, I’d better try and explain that wall. Argyris & Schon wrote that:

“People learn collectively to maintain patterns of thoughts and action that inhibit productive learning.”

What are they on about?

Imagine that, through some form of inquiry, an error (as explained above) has been detected and a team of relevant people commence a conversation to talk about it:

  • The hierarchically senior person begins with a ‘take charge’ attitude (assuming responsibility, being persuasive, appealing to larger pre-existing goals);
    • it is typical within organisations that, once goals have been decided, changing them is seen as a sign of weakness.
  • He/she request a ‘constructive dialogue’, thereby stifling the expression of negative (yet real) feelings by themselves, and by everyone else involved…and yet acts as if this is not happening;
    • each person in the group is therefore being asked to “suppress their feelings – to experience them privately, censor them from the group, and act as if they are not doing so.”
  • He/she takes a rational approach and asks the group to develop a ‘credible plan’ (which becomes the objective) to respond to the error…and so has skipped the necessary organisational self-reflection for double-loop learning to occur.
    • Coming up with a plan is ‘jumping into solution mode’ before you’ve properly studied the current condition and asked ‘why’.

So how does this affect the group dynamics?

“The participants experience an interest in solving the business problem, but their ways of crafting their conversation, combined with their self-censorship, [will lead] to a dialogue that [is] defensive and self-reinforcing.” (Argyris & Schon)

Given that this approach will hide so much, we can expect lots of private conversations (pre-meetings to prepare for meetings, post-meetings about what was/wasn’t said in meetings, meetings about what meetings aren’t happening…). Does this describe what you sometimes see in your organisation? I think that it is often labelled as ‘politics’…. which would be evidence of that wall.

Taken together, Argyris and Schon label the above as primary inhibitory loops.

Argyris sets out a (non-exhaustive) list of conditions that trigger and, in turn, reinforce, such defensive and dysfunctional behaviour. Here’s the list of conditions, together with how they should be combated:

Condition Corrective response
Vagueness Specify
Ambiguity Clarify
Un-test-ability Make testable
Scattered Information Concert (arrange, co-ordinate)
Information withheld Reveal
Un-discuss-ability Make discussable
Uncertainty Inquire
Inconsistency/ Incompatibility Resolve

”[such] conditions…trigger defensive reactions…these reactions, in turn, reduce the likelihood that individuals will engage in the kind of organisational inquiry that leads to productive learning outcomes.” (Argyris & Schon)

i.e. If you’ve got defensive behaviour, look for these conditions… and work on correcting them. Otherwise you will remain stuck.

Unfortunately, primary loops lead to secondary inhibitory loops. That is, that they lead to second-order consequences, and these become self-reinforcing.

  • Managers begin to (privately) judge their staff poorly, whilst the staff, ahem, ‘return the compliment’, with “both views becoming embedded in the organisational norms that govern relationships between line and staff”;
  • Sensitive issues of inter-group conflict become undiscussable. “Each group sees the other as unmovable, and both see the problem as un-correctable.”
    • A classic example of this is the constant conflict in many organisations between ‘IT’ and ‘The business’.
  • The organisation creates defensive routines “intended to protect individuals from experiencing embarrassment or threat” …with the unintended side effect that this then prevents the identification of “the causes of the embarrassment or threat in order to correct the relevant problems.”

From this we get organisational messages that:

  • are inconsistent (in themselves and/or with other messages);
  • act as if there is no inconsistency; and
  • make the inconsistency undiscussable.

“The message is made undiscussable by the very naturalness with which it is delivered and by the absence of any invitation or disposition to inquire about it.”

Do you receive regular messages from, say, those ‘above you’ in the hierarchy? Perhaps a weekly or monthly Senior Manager communication?

  • How often are you amazed (in an incredulous way) about what they have written or said?
  • Do you feel welcome to point this inconsistency out? Probably not.

We end up with people giving others advice to reinforce the status quo: ‘Be careful what you say’, ‘You’ll get yourself into trouble’, ‘I wouldn’t say that if I were you’, ‘Remember what happened last time’…etc.

In short, there are powerful forces* at work in most organisations that are preventing (or at least seriously impeding) productive learning from taking place, despite the ability and intrinsic desire of those within the organisation to do so.

(* Note: Budgets – as in fixed performance contracts – are a classic ‘single-loop reinforcing’ management instrument. Conversely, Rolling forecasts can be a ‘double-loop’ enabler.)

So what to do instead?

Right, here’s my third (and last) diagram:

 

Double loop 3

It looks very similar to the last diagram, but this time there’s a ladder! But where do we get one of those from?

“For double-loop learning to occur and persist at any level in the organisation, the self-fuelling processes must be interrupted. In order to interrupt these processes, individual theories-in-use [how we think] must be altered.” (Argyris & Schon)

Oooh, exciting stuff! They go on to write:

“An organisation with a [defensive] learning system is highly unlikely to learn to alter its governing variables, norms and assumptions [i.e. thinking] because this would require organisational inquiry into double-loop issues, and [defensive] systems militate against this…we will have to create a new learning system as a rare event.”

There’s two places to go from here:

  • What would a productive learning system look like? and
  • How might we jolt the system to see the wall, and then attempt to climb the ladder?

If I can begin to tease these two out, then BINGO, this blog post is ready for print. Right, nearly there…

A Productive learning system

Argyris and Schon identify three values necessary for a productive learning system:

  • Valid information;
  • Free and informed choice; and
  • Internal commitment to the choice, including constant monitoring of its implementation.

Sounds lovely…but such a learning system requires the fundamental altering of conventional social virtues that have been taught to us since early in our lives. The following table ‘compares and contrasts’ the conventional with the productive:

Social Virtue: Instead of… Work towards…
Help and Support Giving approval and praise to others, and protecting their feelings Increasing others capacity to confront their own ideas, and to face what they might find.
Respect for others Deferring to others, and avoiding confronting their actions and reasoning. Attributing to others the capacity for self-reflection and self-examination.
Strength Advocating your position in order to ‘win’, and holding firm in the face of advocacy. Advocating your position, whilst encouraging inquiry of it and self-reflection.
Honesty Not telling lies, or

(the opposite) telling others all you think and feel.

 Encouraging yourself and others, to reveal what they know yet fear to say. Minimising distortion and cover-up.
Integrity Sticking to your principles, values and beliefs Advocating them in a way that invites enquiry into them. Encouraging others to do likewise.

There’s a HUGE difference between the two.

The consequences will be an enhancement of the conditions necessary for double-loop learning – with current thinking being surfaced, publicly confronted, tested and restructured – and therefore increasing long-term effectiveness.

You’d likely liberate6 a bunch of great people, and create a purpose-seeking organisation.

Intervention

The first task is for you to see yourself – you have to become aware of the wall…and Argyris & Schon are suggesting that you may (likely) require an intervention (a shake) to do this. Your current defensive learning system is getting in the way.

Let’s be clear on what would make a successful intervention possible, and what would not.

An interventionist would locate themselves in your system and help you (properly) see yourselves…and coach you through contemplating what you see and the new questions that you are now asking…and facilitate you through experimenting with your new thinking and making this the ‘new normal’. This is ‘action learning’.

This ‘new normal’ isn’t version 2 of your current system. It would be a different type of system – one that thinks differently.

Conversely, you will not change the nature of your system if you attempt to ‘get someone in to do it to you’.

Why not?

“Kurt Lewin pointed out many years ago that people are more likely to accept and act on research findings if they helped to design the research, and participate in the gathering and analysis of data.

The method he evolved was that of involving his subjects as active, inquiring participants in the conduct of social experiments about themselves.” (Argyris & Schon)

In short: It can’t be done to you.

That ladder? That would be a skilled interventionist, helping you see and change yourselves through ‘action learning’.

To Close

Next time someone shows you that lovely (as in ‘simple’) double-loop learning diagram, I hope you can tell them about the wall…and the ladder.

Footnotes

1. Chris Argyris is known as one of the co-founders of ‘Organisation Development’ (OD) – the study of successful organizational change and performance. Argyris notes that he borrowed the distinction between single-loop and double-loop from the work of W. Ross Ashby. For blog readers, we met Ashby in an earlier post on requisite variety.

2. Book: ‘Organisational Learning II: Theory, Method, and Practise’ (1996) by Chris Argyris and Donald A. Schon).

3. Diagrams: Many of the diagrams stay true to what Argyris wrote about. Some attempt to build upon it. Others (in my view) bastardise it completely!

4. Language: I should note that Argyris used different language to my diagram. Here’s a table that compares:

My diagram: Argyris and Schon:
Thinking (Our beliefs and assumptions) Values, norms and assumptions
Action Action Strategies
Performance Performance, effectiveness
Defensive learning system Model O – I
Productive learning system Model O – II

5. Influence: I haven’t used the bolder ‘cause’ word because there’s a lot going on that is outside the system (e.g. the external environment).

6. Liberate: You don’t need to bring in ‘new’ people, most of what you need are already with you – they just need liberating from the system that they work within.

7. Kurt Lewin: often referred to as ‘the founder of social psychology’. Much of my writings in this blog are based around Lewin’s equation that B= ƒ(P, E) or, in plain English, that behaviour is a function of the person in their environment.

A journey through five words

giantknave Brain Farts ,

words-quoteIf you are a systems thinking ‘Deming disciple’ working in Command-and-Control land then your constant expressing of (what many of your ‘leaders’ think of as) unconventional thinking may get you a bad name!

…and those choosing to see you in this negative light may use all sorts of words aimed ‘at’ you.

Perhaps the first word used is that you are ‘cynical’.

Owch!

I had a rather wonderful comedy discussion with a fellow, ahem, ‘cynic’ on this and we found ourselves going on a journey through five words.

So, for all you fellow people ‘getting a bad name for yourselves’1 out there…here’s the journey, featuring useful definitions from the wonderful Oxford English Dictionary (OED).

Start here: The ‘cynical’ label

cynicOkay, you cynic….but are you?

1. “Cynical:  believing that people are motivated purely by self-interest; distrustful of human sincerity or integrity.

This definition easily shows that its usage ‘aimed at’ us is so wide of the mark that it’s easily debunked.

THE point of nearly everything that people like ‘us’ put forward  is that it ISN’T about heroes or bad people, it’s about the bad system that people are forced to operate within. In fact, in quite the opposite direction, our thinking is often accused of being too sympathetic of people. But we’re okay with that (and so was McGregor).

Further, the use of the cynical label is rather hypocritical when used by Command-and-Controllers2.

If we successfully get the “we aren’t actually cynics” point across then a revision is thrown at us:

“Okay, ‘cynic’ is perhaps not fair…but you are ‘sceptical’!”

scepticErm, I’ll have to think about that one…

2. “Sceptical: Not easily convinced; having doubts or reservations.

Yes, I can live with being sceptical (as should every scientist)…but it’s not complete.

Most organisations should actually see scepticism (as properly defined) as a highly desirable quality, and not load the word with the usual negative connotations. We should be experimenting, not blithely implementing something we are copying from elsewhere. And those experiments should be robust, with new learning arising (whether as predicted or not).

In contrast, bucket loads of money are wasted by ‘believers’ rushing around shoving in the next fad or fashion, as directed by the current ‘in vogue’ management gurus. A bit more (healthy) scepticism could do wonders for meaningful progress!

Why isn’t the ‘sceptical’ label complete? Well, being sceptical might suggest being deliberately awkward – perhaps sitting around with a teacher’s ‘red pen’ to tear things apart – and thereby requiring everyone around ‘us’ to do all the creative thinking.

Just being sceptical doesn’t require much work…and this narrow label isn’t acceptable as a descriptor of my reality – I do a hell of a lot of thinking! (and if you are a reader of this blog then I expect you do too).

“Righto – I ‘get’ your scepticism. How about ‘critical’? Surely you’d agree with that!”

criticLet me critique that label for a moment…

3. “Critical: Expressing or involving an analysis of the merits and faults of a work.”

Yep, getting much warmer!

People like ‘us’ are very critical. We (aim to) look:

  • for data, for evidence…to work with facts rather than opinions;
  • from multiple angles…to identify a range of world views, and (importantly) why these are held;
  • at the wider picture…to see the bigger system that the problematic situation sits within
  • at the dynamics of the situation…to see what has happened (including the variation within), and may happen over time.
  • …and on and on.

To which a Command-and-Control manager might respond:

“Blimey! Why would you work so hard…it must send you crazy! Why can’t you just accept what you are being told and run with it – you’d find it soooo much easier.”

And this nicely turns to…

The actual word that could best label us:

 passionate4. “Passionate: Having, showing, or caused by strong feelings or beliefs”

Yep, we are seriously passionate about making our organisation:

  • A great place for everyone to work; and
  • A fantastic experience for our customers;

…which will create and sustain a highly successful organisation.

What’s not to like!

Just as a sense check, the opposite (antonym) of passionate is:

“Apathetic: showing or feeling no interest, enthusiasm, or concern.”

I’m not sure that apathy is going to work out well for any organisation….I suppose that passion will trounce it every time.

But you said a journey of five words…and that’s only four!

delusionalOh yes, once my colleague and I thought we had finished our ‘labelling’ journey, we realised that nothing had actually changed. And so we turn to:

5. “Delusional: Holding idiosyncratic beliefs or impressions that are contradicted by reality”

If our passion fails to change ANYTHING but we continue on in the same way, then we can probably be labelled as delusional. 😦

So, if we want to avoid this label being accurately applied to us, we need to be clear as to:

five-words

I know that I am passionate about what I do…but I’d like to avoid being delusional.

Footnotes:

1. Getting a ‘bad name’: I have been provided with some ‘quiet career advice’ on this in the past (i.e. “stop pushing your crazy ideas – it’s rocking the boat!”)…and, oh, it made me laugh 🙂

2. Cynical: We can say that any management system using carrots and sticks ‘on’ their people (i.e. by incentivising their employees to behave in a certain way, to comply with their wishes) fits the cynical word rather too well:

“Behind incentive programs lies management’s patronising and cynical set of assumptions about workers….Managers imply that their workers are withholding a certain amount of effort, waiting for it to be bribed out of them.” (Scholtes)

Back to that ‘Profit Sharing’ Nirvana

giantknave Brain Farts , , , , , ,

cakeMy last post set out why profit sharing beats incentives by a country mile but I also laid out a note of caution on one aspect, short-termism:

I wrote that “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]”

I have been keeping my eye open for a ‘for profit’ organisation out there that has been demonstrably successful in operating a profit sharing method that fits, and doing so for a reasonable (i.e. proven) period of time…and I believe that I have found such a thing! A Swedish bank called Handelsbanken.

Here’s the story:

At the end of the 1960s Handelsbanken was in crisis so it searched around for a radical thinker to lead them. They found Jan Wallander – an economist who had metaphorically ‘put his money where his mouth is’ by leaving academia and becoming a director of a rival Swedish Bank…and he was doing rather well whilst challenging conventional wisdom.

WallanderHe took on the role of Handelsbanken’s CEO in 1970 and got stuck in to doing things quite differently! As an example, he was particularly scathing about budgets:

“either a budget will prove roughly right and then it will be trite, or it will be disastrously wrong and in that case it will be dangerous. My conclusion is thus: Scrap it!”

As a result of this, Handelsbanken have now been operating very successfully without budgets for over forty years! (There’s an important ‘Beyond Budgeting’ post coming soon)

….but getting back to the profit-sharing subject:

Jan Wallander believed in a profit-sharing system that:

  • is intended as a reward for everyone’s collective efforts and competitive success (i.e. as against other banks); and conversely
  • should not be an incentive for individuals to pursue financial targets.

“beating the competition…is a far more powerful weapon than financial incentives. Why do people need cash incentives to fulfill their work obligations to colleagues and customers? It is recognition of effort that is important. Managers will only strive to achieve ambitious goals if they know that their ‘best efforts’ will be recognised and not punished if they fail to get all the way.”

Wallander set out an overall goal for the organisation (within its banking purpose): attaining a better return on equity than its (listed) banking competitors. This is rather interesting:

  • it doesn’t tolerate for any ‘resting on their laurels’ in easy market conditions; and conversely
  • it reasonably accommodates what might seem disappointing results (in absolute terms) when the market is tough.

Starting in 1973, the bank has allocated part of its profits to a profit-sharing scheme for employees. The main condition for an allocation to be made is that the ‘return on equity being better than the competition’ goal is achieved for that year.

The funds are paid to a profit-sharing foundation called Oktogonen (which was set up by the bank’s trade union club). In turn, the Oktogonen Foundation places 90% of these funds in Handelsbanken shares, thus giving the employees owner representation on the bank’s board.

The Oktogonen Foundation has become the bank’s largest shareholder, with over 10% of voting power.

Okay, so there’s a big fat fund of money…but how do the employees get at it?

This is the long-term bit, mixed with a healthy dose of equality.

Every year that the bank makes a profit allocation into the foundation (which, as it happens, has been achieved every year since its inception) then each current employee is allocated an equal share of units (i.e. salary level is not relevant to this allocation).

The value of each unit then goes up and down with the value of the foundation’s investments i.e. mainly the price of Handelsbanken’s shares.

Current and past employees can cash up their units from the age of 60 i.e. they cannot access any money until this point. This gives the Oktogonen Foundation the character of a pension fund.

This 2013 financial report shows that, if an employee had worked full time at the bank since the start of the scheme in 1973 (i.e. a 40 year working life), their fund units would be worth SKr 14,000,000…which is US$1.7 million at today’s exchange rate!!!! …that would be my pension pot sorted.

Some thoughts on this:

  • you can see that everyone working for the bank is ‘joined together’ (working as a system), aiming in the exact same direction over the long term…yet they also need to do so with speed so as to release the yearly profit allocations. This harnesses together the desires for efficiency and effectiveness;
  • it removes the need for the whole ‘setting personal objectives – arbitrary targets – judgemental scoring – giving of contingent rewards’ commotion….and the people can use this huge amount of freed-up time and wasted energy to work towards purpose. A bye-product is that people can now ‘get on’ as adults rather than as Parent – child;
  • it removes the batch behaviours associated with annual bonus payments:
    • there isn’t a period before year end where some people ‘hang on’ to get their payment when they’ve already checked out for something/ somewhere else; and
    • there isn’t an exodus of people out the door in the months after the bonus cheque has been cashed…causing a renewed batch of recruitment.

… people leave as and when they want to, which makes for transparency and a clear flow, making the balancing of capacity much easier;

  • it binds the employees and the shareholders together. They now have the same long term interest of building and sustaining a business for the future. Conversely, it will likely dissuade short term investors attracted merely by share price volatility…which isn’t in the best interest of organisational success.

What about some likely criticisms?

Here are four likely retorts to the idea of long-term profit sharing instead of short-term incentives:

1. “But what about ‘poor performers’?”

This is usually the first criticism of the profit-sharing method and rests on the belief* that some people will always ‘work harder’** than others and why should ‘slackers’ benefit at the expense of ‘grafters’.

* it is interesting that most people working in a command-and-control environment appear to have this belief about themselves as compared to others. A bit like everyone thinking that they are a ‘better-than-average’ driver 🙂

** I am only covering the ‘effort’ question here. The ability/ scarcity of resource question is covered within the differing levels of salary that people receive.

Incentive schemes are not the answer to supposed ‘poor performance’ – they are frequently used as a substitute for good management and, as such, are an abdication of management’s responsibilities.

Alfie Kohn writes that “In order to solve problems in the workplace, we must know what caused them….holding out a carrot – ‘Do better and here’s what you’ll get’ – is a pseudo solution; it fails to address the issues that are actually responsible for holding back the organisations and the people who work there.

Incentive schemes are frequently used as a substitute for giving workers what they need to do a good job…much less effort is required to dangle a bonus in front of employees and wait for the results…[however] there is evidence that pay-for-performance plans tend to displace careful management…a compensation system is no substitute for careful management.”

But it’s not just management, it’s also about peers! Here’s Handelsbanken’s response to the ‘poor performers’ fear:

“In a team based organisation driven by peer pressure, free riders are exposed very quickly and replaced by people more willing to commit themselves to real performance challenges.” (Source Book: ‘Beyond Budgeting’)

i.e. rather than gifting ‘free riders’ with easy money, the profit sharing method exposes and deals with them!

On advocating the removal of the ‘incentive-performance management’ system, Deming was once asked by a member of his audience “but what will we do instead?” His response was “Try leadership”.

…it has clearly worked rather well for Handelsbanken!

2. “How do we get people to leave? Won’t people hang around forever?!”

This view fits alongside the concern about ‘poor performers’. Consider though that the supposed ‘poor performance’ may very well evaporate…and we now have hugely experienced AND motivated people.

‘But they will be dinosaurs, unable to change’ I might hear someone reply. Really? Do you think that you couldn’t change even if you wanted to? Consider that “People don’t resist change, they resist being changed” (Scholtes). It’s back to that environment again!

Perhaps those ‘resistant to change’ are suffering from ‘change fatigue’: namely, being tired of their huge knowledge being ignored as the next overly simplistic ‘silver bullet’ change programme is done to them.

An organisation with high employee turn-over allows (and often forces) years of highly skilled knowledge to regularly ‘walk out the door’, only for the learning to start again, almost from scratch by the ‘next batch’. If the experienced workers stay, just think of where they could ‘kick on’ to if they so desired.

…but don’t worry, we haven’t engineered a prison! People can and will leave as they wish…and retain the profit-sharing units already assigned to them.

3. “People like getting a lump sum each year to pay for, say, their holidays”

Yes, I can see this (I do too)…but I would happily trade in the pain of the annual performance process (including the dysfunctional behaviours it causes) and the resultant lump sum payment if it meant that I got a real kick out of work because of the amazing environment that I worked in, with people who are equally energised, and who are ‘all running in the same direction’ and helping each other do so.

This brings to mind the quote “Pay people well and fairly…then put money out of their minds.” (Alfie Kohn)…though I might fondly look ahead every once in a while to that pension pot!

4. “What happens if the organisation goes bust?!”

Yep, you’d lose your investment (or at least be at the back of the creditors’ line)…so you would be very keen to constantly:

  • stay alert: look ahead to see external change coming (rather than ‘sit back and wait’);
  • know what’s happening: keep close to your customers and how their needs are changing…and be sure to deliver value to them;
  • innovate: think differently, look at what others are doing, try things out (experiment), pivot in new directions;
  • collaborate and roll-in meaningful change that demonstrably works for the whole system;
  • seek out, recognise, and directly attend to obvious waste and failure demand.

i.e. constantly improve your capability of meeting your customer’s purpose….just what your shareholders and profit-share foundation unit holders (incl. past employees) would want of you!

…and finally, that’s not the whole story:

Cleary, it wasn’t just a superb profit-sharing scheme that has led to Handelsbanken’s success…but it is seen as an enabler and a foundation for the necessary environment to stimulate and secure long term success. Jan Wallander did lots of things differently – probably the greatest being that he was also a firm believer in empowering people through decentralisation.

There is a clear relationship between decentralisation2 – empowerment – intrinsic motivation – purpose – systemic collaboration – continuous improvement – profit sharing.

Notes:

1. Handelsbanken reference material: The history of Handelsbanken

2. On Decentralization: “What is commonly understood by decentralization originates in the conventional command-and-control paradigm, defined as Decentralization 1.0.

To cope with the world’s exploding complexity, some vanguard companies have evolved to a higher level of organization by adopting a new kind of decentralization originating in the enabling-and-autonomy paradigm – hence the term Decentralization 2.0. This refers to organizations consisting of autonomous groups facilitated by an enabling support organization. To keep these high-trust, spirit-driven organizations together, a new kind of deep leadership is practiced by them.” (Decentralization 2.0)

3. The Oktogonen Foundation: For a very clear explanation, scroll right down to Appendix A at the bottom of the ‘Written evidence from Handelsbanken to the UK Parliamentary Commission on Banking Standards’. (Parliament UK)

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.

Rolling, rolling, rolling…

giantknave Brain Farts , , , , , ,

cheese-rolling1So let’s suppose that we (‘Management’) have come up with (what we think) is a great idea to improve a process. We’ve tried it out in one place (such as a branch/ outlet or a team/ shift or a channel/ brand) and we now want everyone else to change to our new brilliant way.

i.e. let’s do a roll out!

Excellent, so let’s ‘grease those wheels’ by bringing in a ‘change manager’1 who can work out sensible things to make this roll out happen:

  • Let’s ‘big it up’: We’ll prepare fancy presentations (and perhaps some posters for around the office) that explain the change in an up-beat and positive way that makes it sound just great!
  • Let’s deal with the worries: We’ll have a period of consultation, prepare a set of FAQ’s in response, and make small changes to show that we have taken these worries on board;
  • Let’s ‘motivate them’ to want it: We’ll adjust everyone’s balanced scorecard and related objectives, targets and incentives so as to make it ‘front and centre of stage’;
  • Let’s create a launch: We’ll design a competition2 where ‘demonstrated compliance’ with the new way wins prizes for an initial period of time.

…does any (all!) of the above look familiar?

Now to reverse this logic:

Imagine that every team:

  • Understands its capability (against a system’s purpose) and works in an environment that wants to continually improve;
  • …so wants to experiment (for themselves) with new ways of working;
  • …so, as well as coming up with their own ideas (which their environment encourages), is really interested in going to see what other teams are doing;
  • …so brings back new ideas to adjust, try, consider and conclude upon (using the Plan-Do-Study-Act cycle);
  • …so is intrinsically motivated to rolling in new ways of working that they believe in.

John Seddon came up with the label ‘Roll in’ to explain this point. Here are his definitions:

“Roll-out: Method that involves developing an improved process, standardising it and applying it to other areas*. This tends to create two problems:

  1. The solution is not optimised for each specific context so it is not a good fit;
  2. The staff in the other units have not been through the same learning and therefore feel little sense of ownership. They may also feel a loss of control and resist change.

(*I note that the much used ‘achieving buy-in’ phrase is synonymous with the ‘rolling out’ phrase i.e. it is actually about someone trying to sell something)

Roll-in: A method to scale up a change to the whole organisation that was successful in one unit. Change is not imposed. Instead each area needs to learn how to do the analysis of waste for themselves and devise their own solutions. This approach engages the workforce and produces better, more sustainable solutions.”

…meanwhile back at Toyota:

You might have heard that a big part of the hugely successful Toyota Production System (TPS) is standardisation3. and you might then make the mental leap to assume that every shift in every comparative production line in every Toyota plant across the world conform to the one ‘standard’ (i.e. the exact same methods). Yet such an assumption would be incorrect.

Liker’s decades of Toyota research makes clear that change is most definitely NOT imposed on the people and their processes. Instead, each unit (at all levels) is set a clear challenge (a target condition ) that aligns with purpose and is then coached through experiments to achieve it. And, once achieved, the cycle starts again.

So a given team on a given line in a given plant will want a standard way of working so that they are very clear on how to (currently) perform a task but this standard may be quite different to another team/ line/ plant.

Key points in this Toyota way of thinking:

  • The challenge that is set isn’t about rolling out some pre-defined solution. The solution is not known. It is up to each team to work out how to get there for themselves (see ‘how to have a successful journey’);
  • Each challenge is specific to each team, taking account of their current condition;
    • A mature plant in Japan would have very different challenges set to a much newer plant in, say, America, even though they might be making the same car model;
  • It is perfectly acceptable for one plant (say) to arrive at a different method of working to another. This is in fact considered a good thing because it keeps people thinking, broadens ideas and sets off yet deeper studying and understanding…fuelling yet more improvements;
  • It creates a desire for collaboration between plants: they are very interested in what others are doing (going to each others ‘Gemba’* ). This is the total opposite to the competitive (and myopic) mentality of ‘Our team’s way is the best way…it must be – we won a prize!‘;
    • In fact, a mature Japanese plant wants to go and see what a newer American plant has come up with because they understand that the ‘newbies’ may have come up with completely different (and potentially step-change) ways of thinking.
  • If a team from plant B do a Gemba walk at sister plant A and sees something of interest, they don’t just go home and implement it! They can’t – because that would just be the ‘plant visit’ team dictating to their colleagues back home. No, instead, they will explain what they saw, experiment, decide whether it is of use to them and, if so, adapt so that it fits for their needs;
    • The original plant A is highly likely to do a ‘reverse’ Gemba walk to see what plant B has done with their ideas…and then rush back home to experiment again….and, hey presto, what a healthy innovation cycle we have!

(* Reminder: Gemba roughly translates as ‘the place where the work happens’)

In short: Seddon didn’t invent the ‘roll in’ idea (Toyota, as an excellent example, have worked this way for decades) but he is very good at putting it into words, giving it a name and passionately championing it.

Looking back, it seems pretty obvious that if people find out about and learn things for themselves then this will be fulfilling and lead to real and sustained successes….which will create a virtuous circle. No such worthy circle exists from ‘stuff being done to you’.

But what about that Iceberg?

Many of you will have been introduced to, and likely read, John Kotter’s well written business story book called ‘My Iceberg is melting’. If you haven’t then it’s about a colony of penguins having to deal with a change being imposed upon them (the clue to that change is in the name of the book!).

Now, if you are having a change imposed upon you, then Kotter’s logic might be very useful to you….but, wow, wouldn’t it be sooo much better if you decided on your own changes!

I think one quote sums much of this post up nicely:

“People don’t resist change, they resist being changed.” (Scholtes)

Be realistic!

“Oh come on Steve, sometimes change is imposed and you’ve just got to deal with this!”

Yes, this is most definitely so. But here’s some counters to this critique:

  • Such a change should be coming externally (such as a legislative, societal or environmental change)…not from within the organisation;
  • Even if such change occurs, it is still better for the organisation to deal with it by setting its people suitable challenges (rather than dictated solutions) and leading them through rolling in changes for themselves;
  • If your people are used to the ‘roll in’ change paradigm then you will have a whole bunch of people who are skilled, creative and motivated problem solvers …just imagine how fantastic that capability would be for an organisation every time the challenge of an external change has to be handled!

…and finally:

Here’s an Ackoff ‘f-Law’ that might resonate with you as a true-ism:

“The only thing more difficult than starting something new in an organization is stopping something old.”

I think we all recognise that the ‘roll out’ problem doesn’t stop with merely getting someone to do something new…

Consider that, in contrast, by using ‘roll in’ the people are choosing for themselves to stop doing the old (whatever that is for them).

______________________________________________________________________

Addendum: I always ask someone (relevant to the subject) to act as editor before I publish. My editors always add great value Here are a few improvements:

  • Whilst Toyota may not enforce the same standard way of working across everywhere, it could be argued that they do have a cross-organisational standard way of thinking and acting (i.e. their management system, which has been termed ‘The Toyota Way’)…but, just like rolling in, this wasn’t copied from elsewhere and dictated to them – it came about through years of humility and experimentation;
  • If you want everyone rolling in the same direction then you still need a very clear (and meaningful) purpose, and systems thinking, such that all challenges being set lead to the same point on the horizon;
  • The ‘corporate form’ (e.g. a public body, private enterprise, large publicly quoted company,…) will likely have a huge impact on where you are now, and where you can get to;
  • You might like the idea of rolling in (as compared to rolling out) and say “yeah, great…how do we get there from here?” This is a BIG question, and just happens to relate to a future post which the ink is drying on….so, with that segue, please tune in again then.

Notes:

  1. Change management within command and control organisations is usually about senior leaders getting people to do what they want them to. Their employment of a skilled ‘change manager’ (of which there are many) may substantially improve the roll out outcomes…but it is still a roll out, with all its associated limitations.
  2. Competitions: Please don’t run ‘change’ competitions like this…or, if you do, know the harm that they cause. Research* shows that: Providing a reward for doing something seriously devalues that thing; and people think even worse of that thing once the reward period has finished, thus likely slipping back to how it was before and then making it that much harder to ‘get them to change’ (* see Alfie Kohn’s book ‘Punished by Rewards’).
  3. Standardisation: Don’t make the assumption that this standardisation principle is exactly the same for service organisations – it isn’t. I use it in this post merely to explain and demonstrate the roll-in principle.

People and relationships

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

!cid_image003_png@01D0AE76Relax, don’t worry about the title: I will be limiting this post to ‘work relationships’…and I don’t mean ‘relationships at work’.

Peter Scholtes wrote that, to understand people, we need to understand relationships. In particular, leading people requires the establishment and nurturing of personal relationships on a daily basis and the encouragement of others to do the same.

He sets out some characteristics of what he calls “a good, old-fashioned one-to-one, face-to-face, first name to first name personal relationship”:

  • You listen to each other. You are able to talk to each other;
  • Each respects the other and knows how to show this respect; and
  • Each knows the other well enough to know their vulnerabilities and cares enough to avoid them.

Now, relationships are hugely important between manager and employee. Unfortunately, these relationships in most organisations are patronising and paternalistic.

The psychiatrist Dr Eric Berne (1910 – 1970) set out three ‘ego states’ – postures that we assume in relation to each other. These are:

  • Parent: from nurturing and supportive through to judgmental and controlling;
  • Adult: from realistic, logical, rationale through to affectless; and
  • Child: from playful and creative through to rebellious and spiteful.

Command and Control management systems necessitate ‘management’ to assume a parent ego state, which often ends up causing the employee to adopt a child-like ego state in reaction. The words ‘boss’ and ‘subordinate’ (both of which I dislike) fit this parent – child relationship narrative.

In reality, we are all adults at work. It just happens that we are employed to play different roles – from helping customers through to running a business division.

It is each leader’s choice as to the ego state they adopt…and therefore the likely ego state that their employees will take in response.

As an example: I find it odd when a manager verbalises to ‘their’ employee that what they are about to say to them is a ‘coaching moment’ (i.e. “…so listen up and take note!”) – how much closer could you get to a parent – child presumption by the manager? It’s akin to what my youngest son refers to as “getting a lecture” from me.

To be clear, I am most certainly NOT saying that I can’t be coached (I clearly can)….but:

  • A coachee needs to a) have a personal goal and b) a desire to be coached towards it. You can’t ‘coach’ without these two requisites;
  • A leader can equally (and often) be coached by employees, but only if they have their mind opened to be so; and
  • Pointing out to someone that ‘this is a coaching moment’ is patronising and presumptuous and demonstrates an (often sub-conscious) intent to enforce a superior (‘alpha’)/ inferior relationship signal…and it generally breaks point 1, so it isn’t actually coaching.

Right, coaching rant over, back to it….

Leaders need to recognise that we are all people (organistic systems), with our own separate purposes (just like them). The need is to establish adult-adult relationships, in which no one sets themselves out as being ‘above’ or ‘better’ than anyone else. If an organisation’s leaders succeed in this then they will have created a hugely powerful environment.

So, moving on to trust:

Healthy relationships require trust. Here’s an interesting figure from Scholtes showing the two converging beliefs that need to coexist for one person to trust another:

!cid_image002_png@01D0AE76

I find this figure illuminating. It makes me see that (and understand why) I have had some managers that I have respected and some that I have had (professional) affection for…but trust is much rarer.

Scholtes writes that “When I believe you are competent and that you care about me, I will trust you. Competency alone or caring by itself will not engender trust. Both are necessary.”

A couple of comments on trust:

  • I doubt it can be over emphasised that trust is in the eye of the beholder! ‘You’ can say that you care about me and that you know what you are doing but only ‘I’ decide whether I believe this…and I will be looking closely (and constantly) at your actions, not taking your word for it;
  • Some command and control managers have the view that employees need to earn their trust…this is the wrong way round! If someone wants to lead, they have to earn the trust of those that they would like to follow them.

KITA management (aka the picture at the top):

Now, onto the idea of KITA management: the term ‘KITA’ was coined by the psychologist and Professor of management, Frederick Herzberg (1923 – 2000)*. It stands for Kick-in-the-(pants)…he was too polite to write what the A actually stood for.

Herzberg wrote about positive KITA (carrots) and negative KITA (sticks)…and here’s why it isn’t motivation:

“If I kick my dog (from the front or the back), he will move. And when I want him to move again, what must I do? I must kick him again…” (Herzberg)

The related problem with KITA thinking is that it locks manager and employee in a highly unhealthy parent-child relationship. Further, when rewards are competitive (which they usually are in some way) KITA thinking creates winners and losers and adversarial relationships among those who should be colleagues.

* Note: Herzberg wrote the classic 1968 article “One More Time, How Do You Motivate Employees?” This is one of the most requested HBR articles of all time and has sold well over 1 million copies.

…and finally:

I’d like to share with you some wise words written by Alfie Kohn under the self-explanatory title ‘Rewards rupture relationships’

“We need to understand what the process of rewarding does to the interaction between the giver and receiver:

If your parent or teacher or manager is sitting in judgement of what you do, and if that judgement will determine whether good things or bad things happen to you, this cannot help but warp your relationship with that person.

You will not be working collaboratively in order to learn or grow; you will be trying to get him or her to approve of what you are doing so that you can get the goodies.

A powerful inducement has been created [through the regular judgement and resulting outcomes] to conceal problems, to present yourself as infinitely competent, and to spend your energies trying to impress (or flatter) the person with power….

… people are less likely to ask for help when the person to whom they would normally turn wields carrots and sticks. Needless to say, if people do not ask for help when they need it, performance suffers on virtually any kind of task.”

…and, in so writing, Alfie eloquently uncovers the damage caused by rewards and the stunting effect they have on the ability of an organisation, and its people, to improve.

The positive bit: It would be great if all of us worked really hard to attain an adult-adult relationship footing…realised when this had been broken by our words and deeds …and, through humility and dialogue, worked even harder to bring it back again.

An apology: I have a rule that a post should only cover one thing…and this one doesn’t appear to! It’s a bit of a journey from relationships, through leadership, coaching, trust, motivation and ending at rewards, which brings it full circle back to what rewards do to relationships.

In fact the topics in this journey do all belong together, under the competency of ‘Understanding people and why they behave as they do’. My intent was to show how they are all so tied up together so I hope you don’t mind me bending my rules 🙂

Outstanding!

giantknave Brain Farts , , , , , ,

Hello-My-Name-is-SlackerWhen I discuss my posts on performance appraisal and contingent rewards with people I get a lot of great understanding and support…but there’s always one question that pops up: “but then how will you deal with the slackers?”

Putting to one side whether our management instruments actually ‘deal with the slackers’ at the present, I find this an understandable response from within a command-and-control management system.

I usually find myself responding with:

“…and why do you think they are ‘slacking’*…do you think they want to perform an unfulfilling job all day long? Do you think this is how they started out when they got the job?”

(* if indeed they are ‘slacking’…our activity measures may present a different story than reality)

I then usually get: “yeah, but there will always be some people who take the p1ss!”

This uncovers a pretty hollow view of people. I’m not criticising people for thinking this …it’s more a recognition of the likely environments that people have had to endure through our working lives.

I would respond with a Deming quote to ponder:

“Anyone that enjoys his work is a pleasure to work with.”

  • You and I want to enjoy our work…and the environment that we work within will have a monumental influence on this;
  • I absolutely ‘get’ that there will almost always be a small % of people that sit outside the normal bell curve…but should we be designing our management system for the 5% or the 95%?
    • Do we tar everyone with the 5% brush?
    • Do we effectively yet compassionately deal with this 5% now?
    • Does it make sense that people ‘decay’ to being seen in this 5% bracket?

Regarding dead wood: “Why do we hire live wood and kill it?”

Kohn puts a deliberate order to his suggested actions (see the bottom of the ‘Exercise in Futility‘ post) and he most certainly doesn’t stop at removing contingent rewards and stopping performance appraisals…this is actually the point at which the real (and interesting) work can start to be done, with the process performers on collaboration, content and choice.

Okay, so you still think you’ve got a slacker:

If we are to consider the ‘slacker’ accusation, we also need to consider the other side of this coin, the supposed ‘talent’. Together, we can call these ‘outstanding performers’ where, as Scholtes explains:

We need to “use ‘outstanding’ in the statistical sense, not in the psychological sense.

Statistically*, ‘outstanding’ refers to something occurring outside the current capabilities of the system.” …and therefore it makes it worth investigating as to what is happening and why.

* Note: There is variety in everything. We should not be tampering when there is nothing special about this variety. So ‘John’ achieved more than ‘Bob’ this week…big deal, we would expect differences…but is it significant, and is it consistently so?

Scholtes provides the following guidelines for our response to outstanding performance:

First: Determine for certain if they are truly outstanding:

  • Does (quality) data (properly) substantiate this ‘outstanding’ performance?
  • Does this data cover a sufficient timescale to indicate consistent performance at this lower or higher level?
  • Is there consensus among the outstanding performers’ peers (from observation, not gut reaction or rumours)

If the answer is ‘No’, it’s not actually outstanding!

If the answers to the above are all ‘Yes’ then:

Second: Investigate to discover what is behind this occurrence (using data!):

If the person is ‘positive’ outstanding, do they (for example):

  • use better methods which can be taught to others?
  • put in more hours?
  • have a wider range of skills?
  • have more experience?
  • have more native talent?
  • …

If the person is ‘negative’ outstanding, do they (for example):

  • need to learn a better method?
  • need to pick up speed?
  • need coaching or mentoring for a while?
  • lack the basic requisites for the job?
  • …
  • are they going through a difficult period?

And, depending on the explanation:

Third: Formulate an appropriate response:

For ‘positive’ outstanding:

  • teach methods to others;
  • provide higher pay* to recognise their change in market value (* but NOT contingent!)
  • provide more latitude in job definition

For ‘negative’ outstanding:

  • coaching, mentoring, training
  • provide greater structure for a while
  • get counselling and support
  • find a more appropriate position
  • …
  • Finally, sensitive and fair dismissal

If you take the last response, you still have a systems problem – you need to deal with how you ended up with this scenario.

Seddon deals with the issue of an individual’s supposed poor performance (and it being considered a ‘people problem’) in a similar vein to Scholtes. Put simply, there’s a whole host of questions that need to be asked about the system in which the individual operates before you can fairly arrive at the conclusion that the problem is with the individual.

The categories of questions, in order, are:

  • Is it an information problem? (do they know purpose, capability, flow?)
  • Is it a method problem? (waste? system conditions such as structures, policies, measurement, IT?)
  • Are extrinsic motivators the problem? (i.e. distractions from intrinsic motivation)
  • Is it a knowledge problem? (necessary knowledge to do the job?)
  • Is it a selection problem? (necessary attributes to do the job?)

All of the above are the responsibility of management to resolve.

  • Finally, is it a willingness problem?

Then, and only then can you conclude that you probably have the wrong person for the job.

“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.” (Deming)

It’s very easy for a manager to blame a person. It’s a lot harder for them to work out what the systemic cause is. One of these approaches can improve the system, the other cannot.

A final Deming quote to ponder:

Question from ‘Management’: [what you are saying] “implies the abolition of the annual merit rating system [performance appraisals] and of management by [cascaded] objectives….but what will we do instead?”

Deming’s response: “Try leadership.”

An Exercise in Futility

giantknave Brain Farts , , , , ,

Dalmatian-chasing-tail-006Now this post is a bit longer than normal, but I hope that the 1st quote grabs you and sucks you in…I reckon that once you start you won’t stop 

“Performance evaluation is an exercise in futility” (Scholtes)

Every organisation operating a ‘command and control’ management system uses the performance appraisal as a key tool in its arsenal.

The contention in this post is that one of the key steps in providing an environment that fosters a highly motivated and capable workforce is to scrap the performance appraisal system and replace it with something far better.

Problems with performance appraisals

Let’s first consider just some of the problems with actually carrying out what might be considered a valid performance appraisal of an individual – that’s you and me:

  • Appraiser Bias: Performance assessments tell us as much about the appraiser as the appraisee. It tells us how harsh a critic the manager is, how good a job he/she expects the employee to do, how well the two of them get along, what basic values they share and even whether their backgrounds are similar; 
  • Management performance: The quality of management has a huge influence. “any individual’s performance is, to a considerable extent, a function of how they are managed…so the manager is in part evaluating him/herself without appearing to do so.” (McGregor) 
  • Interdependence: None of us act alone. “Almost nothing is accomplished by an individual operating alone. Most work is obviously a collective effort. Yet even workers who seem quite independent depend on others for ideas, stimulation, feedback, moral support and administrative services.

When an individual makes some heroic effort and accomplishes an extraordinary task, often he or she can take the time to do that work only because others have filled in on the less heroic parts of the job. When someone is credited with a success, he or she is individually honoured [e.g. by money, award, public acclaim] for what was most likely the work of many.” (Scholtes)

  • The effects of the system: Deming used his famous red bead experiment to illustrate this point simply yet brilliantly. He explains that the performance of the employee is 95% governed by the system that they work within. The ranking of people is actually merely ranking the effect of the system on the people. 

“It is simply unfair to the extent that employees are held responsible for what are, in reality, systemic factors that are beyond their control.” (Kohn)  

  • A straight jacket: Appraisals ‘compare’ everyone against a uniform expectation (albeit per manager – see 1. above) rather than understand and embrace the reality that everyone is unique, with very different (often subtle) contributions to make.

Deming wrote the wonderful words that “a [true] manager of people understands that people are different from each other. He [or she] tries to create for everybody interest and challenge and joy in work. He tries to optimise the family background, education, skills, hopes and abilities of everyone. This is not ranking of people. It is, instead, recognition of differences between people, and an attempt to put everybody in position for development.”  

  • Ignoring variation: The work of each individual is characterised by variability…it will naturally fluctuate! You cannot be the same every minute of every day….if you were, you would be a machine! Further, the major causes of such variation are beyond the attributes of the individual. So should you be criticised or praised because of ups and downs in your supposed ‘performance’ outside of your control?

I could go on…but I fear that I would write a book!

The performance appraisal creates the illusion that management have indeed isolated and determined the performance of an individual. Worse still, it allows management to abdicate their responsibilities – they will simply meet the person each period, get the person to justify themselves (with evidence!) and then judge them….no need to actually get to understand who they are, what their dreams and aspirations are, and therefore discuss how they can help them become reality.

The effects of performance appraisals

Most organisations running performance appraisal systems will answer back in denial: “yes, we know all about the above and we have ‘continuously improved’ our process through much iteration so there’s no such problems here!”

I would contend that they may have succeeded in creating a (laborious, bureaucratic and wasteful) process that masks (i.e. disregards) the above, but they cannot remove them.

But, for the sake of argument, let’s just suppose they have….what about the effects of the performance appraisal:

[the system by which merit is appraised and rewarded is] “the most powerful inhibitor to quality and productivity in the Western world….it nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry…and leaves people bitter.” (Deming)

“Even if performance appraisals were adequate to gauge how well people were doing their effects are usually so destructive that they shouldn’t be used anyway. Not only is the fact of interdependence in the workplace ignored, but people are discouraged from cooperating in the future.” (Kohn)

“Appraisals leave people bitter, bruised, despondent, dejected, feeling inferior, some severely depressed.” (Seddon)

What do people running performance appraisals say they are for?

Rather than simply looking for a new technique to continue with the old flawed logic, let’s consider why people are being evaluated.

Kohn notes four ‘defences’ as being used by those that contend performance appraisals are required. They say they are needed to:

  1. Determine how much each employee should be paid and/or who should receive various awards and incentives;
  2. Make employees perform better for fear of receiving a negative evaluation or in the hope of getting a positive one;
  3. Sort employees on the basis of how good a job they are doing so we know who to promote; and
  4. Provide feedback, discuss problems, and identify needs in order to help each employee do a better job.

Taking each of these in turn, and using some of my previous posts so that you and I can finish this post today!!…

Regarding 1: Please read the following posts already on the blog that debunk the use of contingent rewards: The Chasm and Money as pay

Regarding 2: Please read Oh no, not that old theory and Making a wrong thing righter that explain why ‘carrot and stick’ approaches to motivation are counter-productive.

Regarding 3: Please read Anointing heroes. Further, there is a whole post to be written on promotion (I’ll add it to my list!). It’s not a good reason to carry out performance appraisals.

Defences 1 – 3 are about doing things to people…which leaves 4 as the only one which could be about working with people….mmm, if we got rid of 1 -3 then this is sounding promising! Read on.

So what should we replace performance appraisals with?

Kohn suggests that, if the over-riding purpose is to foster improvement (for the individual, and for the organisation) then the following principles take shape:

  • A two-way conversation:
    • An opportunity to trade ideas and ask questions;
    • NOT a series of judgements about one person pronounced by another;
  • A continuous process, rather than a time bound event (e.g. annual, quarterly);
  • It never involves any sort of relative ranking or competition (no scoring!);
  • It is utterly divorced from decisions about compensation
    • “Providing feedback that employees can use to do a better job ought never to be confused or combined with controlling them by offering (or withholding) rewards.” (Kohn)
    • It is “foolish to have a manager serving in the self-conflicting role as a counsellor (helping someone improve performance) when, at the same time, he or she is presiding as judge over the same employee’s salary” (Meyer)

Essentially, Kohn is arguing for good old fashioned regular and meaningful conversations between employee and manager within an environment of openness and mutual trust. I’ll have some of that!

Scholtes takes this further: Performance appraisals focus on the wrong target! The true opportunities for improvement are in an organisation’s systems and processes, rather than individuals or groups. Instead of focusing on individuals, managers should be working with individuals to focus on the problems with the system.

It’s worth noting that an organisation taking the above seriously won’t be able to move to this highly desirable state overnight: Once the scoring, ranking, rating and rewarding has been stripped out, it will take a bit of time for managers to establish the trust of their employees.

On the plus side, the vast majority of managers will relish the removal of the hugely wasteful processes and painful conversations of the old way…and will really enjoy spending the newly created time actually helping their team.

What about the advice from all those expensive consultants?

You will find queues of expensive consultants who will tell you otherwise.

Scholtes notes that most ‘research’ on performance appraisals consists of opinion polls asking “which kind of performance appraisal do you prefer?” They are usually:

  • conducted by consulting companies selling their ‘Human Capital’ services;
  • filled out by HR managers who, as a group, are predisposed in favour of performance appraisal…no disrespect meant but it is, after all, a major part of their (current) job; and then
  • sent back out to the same group of HR managers in glossy consultancy report format along with a nicely worded proposal as to how the consultancy can help implement what they now claim to be ‘best practise’ and move them up some supposed ‘maturity curve’!

Scholtes notes “when biased people ask the opinions of biased people, the results cannot be described as research.” This quote is so relevant to many a ‘big consultancy’ report purporting to be ‘research’.

…and finally: what do the Japanese do?

A really nice story from John Seddon:

“I was asked to write an article exposing the problems with performance appraisals for a Sunday newspaper. I submitted my 1st draft.

  • The editor suggested I should provide balance by talking about what to do instead.
  • My response was that you don’t need to find an alternative to doing a bad thing – you should just stop doing it!
  • The editor said ‘ring your friends in Japan and find out what they do’.
  • …so I did.
  • I asked ‘what do you do about performance appraisal?’
  • The reply was ‘what is that?’
  • …I explained.
  • Japanese people tend to be too polite to laugh.”

Educator, not Guru

giantknave Brain Farts , ,

theloveguruFollowing the theme of my earlier post on education, I’d like to share a great Russell Ackoff quote which he wrote as part of the forward to Peter Scholte’s superb book ‘The leaders handbook’:

“A guru is one who develops a doctrine and seeks disciples who accept and transmit it without modification. No deviation is acceptable. Any modification is a sign of disloyalty, in fact, heresy. Its consequence is excommunication.

Educators, on the other hand, encourage and even try to inspire progressive deviations from what they have said. Their objective is not to remove the need for further learning, as is the guru’s, but to initiate it – to provide a springboard from which their students can dive into their own minds, discover what is there, and develop it.

The number of management gurus is increasing at an alarming rate. We do not yet have one guru per manager but we are rapidly approaching that number. The ultimate success of a guru is to produce the fad of the week, becoming number one on the managerial hit parade. Successful or not, gurus preach panaceas the validity of which they pretend to have received directly from the Great Manager in the Sky, who actually resides in the mind of the gurus.

What educators teach comes from experience, their own and that of others, not from revelation.”

Be wary of the management cults of… [please insert the name of today’s panacea].

Oh no, not that old theory!

giantknave Brain Farts , ,

9365403Most of us who have been on some form of management course will likely have heard of ‘Theory X and Theory Y Management’. You may groan and say “oh no, not that old theory…I’ve never used it for anything” or “you’re a bit behind the times…we’ve all moved on since then!”

The more I look back at the early work on management, the more I believe that they contain profound foundations for what has come since. Let me explain.

A short history lesson (taken from Scholtes ‘The Leaders Handbook’ and Handy’s ‘Understanding Organisations’):

  • Douglas McGregor’s father and grandfather were ministers;
  • His grandfather founded a homeless shelter in Detroit during the 1930s depression;
  • A young Douglas worked in the shelter alongside his father and grandfather.

Douglas and his father held very different views on the people they assisted, something that they would argue about.

  • His father held negative views towards the unemployed and homeless, considering them shifty and lazy etc;
  • Conversely, Douglas considered the poor to be no different from others, just that they were simply down on their luck and victims of a terrible economic situation.

As Douglas grew older, his thinking evolved into his famous 1960s articulation of Theory X and Theory Y assumptions about workers.

Theory X:

  1. The average human being has a natural dislike of work, and will work as little as possible;
  2. He/she lacks ambition, wishes to avoid responsibility and prefers to be led;
  3. He/she is by nature resistant to change but is gullible and not very bright;

Because of these characteristics, most people must be coerced, controlled, directed or threatened so as to modify their behaviours to fit the needs of the organisation.

The above might be said to require a ‘command and control’ style of management.

Theory Y:

  1. The expenditure of physical and mental effort in work is as natural as play or rest;
  2. People will exercise self-direction and self-control in the service of objectives to which they are committed;
  3. The motivation, potential for development, capacity to assume responsibility, and readiness to direct behaviour towards organisational goals, are all present in people;
  4. The capacity to exercise a relatively high degree of imagination, ingenuity and creativity towards organisational problems is widely, not narrowly, distributed in the population.

It is the responsibility of management to arrange the conditions and methods of operation so that people can achieve their own goals best by directing their own efforts in alignment with the purpose of the organisation.

The above matches the teachings of W Edwards Deming and what has been labelled a ‘Systems Thinking’ management system.

The point: McGregor was NOT writing about two different types of people. His theory was about two sets of assumptions made about people.

We can see that this will be a self-fulfilling prophecy. If management apply Theory X assumptions to their people (commanding and controlling them), then they can expect to see Theory X behaviours in return. This is cause and effect.

People are not, by nature, passive or resistant to working towards the organisation’s purpose. They have become so as a result of the management system that they experience.

Conversely, if management provides an environment that allows systems thinking, collaboration, interesting work content and choice through self direction, then we can expect Theory Y assumptions to become a reality.

A clarification: Theory Y still requires a clear sense of organisational direction (purpose) and systemic structure (though not necessarily hierarchical).

As an aside:

  • I always see a flaw in Theory X assumptions. It requires manager and worker to be two different sub-species of human beings. Otherwise the theory is disproved by contradiction – if, for example, people don’t like responsibility but managers do, then they can’t be the same human variety!;
  • Conversely, I see that Theory Y fits with one human genus. It works no matter where you are positioned within an organisation’s system.

Actions speak louder than words: Now, you will likely say “…but leaders always talk about their ‘Theory Y’ assumptions”….and, yes, I realise that this is so…this is what they (rightly) think the people want to hear.

But are their actions the opposite? What about the management instruments of cascaded personal objectives, arbitrary numeric targets , contingent rewards , and the rating and ranking of people’s ‘performance’.

A subtle, yet massive implication: If leaders use carrots and/or sticks then they are subscribing to Theory X assumptions about their people….otherwise carrots and sticks would make no sense.

A thought-provoking quote from Scholtes:

“Behind incentive programs lies management’s patronising and cynical set of assumptions about workers….Managers imply that their workers are withholding a certain amount of effort, waiting for it to be bribed out of them.”