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To have meaningful work that enables our independence and to live with dignity should be a basic human right

Month: May, 2014

Corporate Achilles heel: why strengths can be the problem with performance

The longer the organisational practice of managing strengths and weaknesses as the basis of performance is allowed to go on, the more we will see what had appeared to be healthy, robust companies, being brought down.  Not unlike steroid use, there will be a point where trying to increase strength will have a detrimental effect on the person’s overall health.

When we refer to strengths we mean something desired.  Weaknesses are something to be humbly addressed; they are identified for the good reason that they can then be eradicated.  Put these together and it is clear that the path to corporate performance is through managing the dichotomy of strengths and weaknesses.

This being the purpose of an organisation is so soundly entrenched that it is never questioned.  Nothing in the system suggests that there is such thing as a limit or a point where there is ‘too much’.  New material continuously fills our inboxes, social media posts and anywhere else we accept teachings on how to manage these days, explaining how to accomplish more strength more quickly, more accurately and more decisively.  As organisations become more complex, harder to manage and competition increases, the more determinedly companies go about lauding strengths and correcting weaknesses, putting everyone on notice that there should be no doubt about what it is the company desires and will reward.

The ‘strengths’ equals ‘winner’, and ‘weaknesses’ equals ‘corrective action required’ mindset – regardless of how this is packaged – is far too simple.  Their contribution to success is only true to a certain point, and can never be seen as a complete solution.  What we fail to recognise is not just that there are limitations, but that unchecked, the practice becomes a hazard.

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The singularity of the strength/weakness mentality blinds us to the contexts in which we have decided which attributes are strengths and which are weaknesses.  When we are presented with a job application in which personal strengths are boldly declared, instead of alarm bells sounding we conclude that these are the key contributors to how well the candidate will ‘fit’ into the company and the position.

Typically, for example, we appreciate high levels of education, good social standing, the ability to inspire respect, specialised knowledge, and professional scepticism (a questioning, analytical approach) as positive attributes.  We keenly encourage the development of these strengths by including them as criteria for hiring, promotion and salary increases.  Yet these are the same attributes that are the common characteristics found in people guilty of white-collar crime.

When we condition people to think about performance in isolation from the environment, it creates a situation in which the individual’s orientation to the self takes precedence.  The culture and social norms become the servant to the individual’s perspective.  In cases of corporate fraud, for instance, it is not unusual for the perpetrators to see no conflict between their actions and their identity as a good person.  Seventeen people were charged and 16 convicted (the 17th, Kenneth Lay passed away) following the Enron scandal in 2001.  Each of them had difficulty accepting that they had acted wrongly.  In the microcosm of their roles in the company, they believed their actions were necessary for the organisation’s survival.

Far less dramatically, but no less damaging are those corporate leaders who slowly take their companies down the path to incompetence because their strengths lose their potency as the business environment changes.  Despite the company’s evolving needs, and even if they apply new tactics, they never question the validity of their ‘strengths’.  Perhaps if they had not so assiduously eliminated, hidden or overcome their ‘weaknesses’, they may find in these the right response for their present circumstances.  Perhaps yesterday’s sluggish response or old-school methods are today’s cautiousness or traditional approach and exactly what the company needs at this time.

Failed strategy can often be traced back to a faulty SWOT (strength, weaknesses, opportunities, threats) analysis, and change programs often fail having fallen victim to leaders who undertake the change process in a way that suits their strengths.

The sociologist Robert K. Merton proposed that emphasising goal achievement of the individual, neutralises the effectiveness of the environment to inform behaviour.  In the case of fraud, the social structure and norms that should have operated to control the motivations towards misconduct, lose their power producing a state of ‘anomie’, meaning absence of moral guidelines.  In this state, rationalisation is deluded rather than deliberate.

The strengths/weaknesses focus builds a competitive mindset and one that intentionally exerts pressure on individuals to perform.  In this environment, some personalities will shift quickly from the satisfaction of achievement to the thrill of the win.  Others will not cope with the pressure of constantly living up to their strong self.  Yet others, particularly with overwork, will lack the mental clarity to see the totality of their behaviour – a little like, while watching your every step you do not notice you are heading in the wrong direction.

Instead of looking at attributes as strengths or weaknesses, we should pay more attention to the lens through which we view them.  If the organisational context plays a greater part in our evaluation of performance, we will be better at identifying, from the broadest possible perspective, the particular attributes that contributed to particular outcomes.  Strengths, we should be aware, are not an absolute and therefore cannot be managed as though they are a certain predictor of corporate success.

 

Making organisations work: Part 2

Perhaps because my first tertiary qualification was in marketing, one question about working in organisation development has continued to nag at me over the years.  If the organisation is the most significant contributor to business success then why are the professionals who design, develop and manage them, and those who manage the people who make them up, so poor at articulating their business impacts?

Instead of quantifying their results, they quantify the people who provide them.  Instead of using real measures (financial performance) we demonstrate our value using ‘indicators’.  With knowledge workers, the task of measuring personal performance has become impossible, so they create measures for inputs (such as initiative) that do not necessarily link to the desired outputs.  The equivalent would be HR using the revs of the engine to measure speed while finance uses the speedometer.

Patrick Lencioni in his 2012 book, The Advantage: Why Organizational Health Trumps Everything Else in Business, argued that companies that are consistent and complete will outperform their competitors.  The question of the role of the organisation in the success of the business has been the topic of years of research by McKinsey & Company, who share their findings in articles such as, Organizational health: the ultimate competitive advantage, and The hidden value of organizational health – and how to capture it.  In these studies a clear relationship is drawn between the qualitative aspects of management and above-average financial performance.  The question is, why do we persist with measuring things that should not or cannot properly be measured and baulk at using the measures that matter?

Maybe the answer is as simple as the need to justify our existence.  Shareholders and boards want results they can see.  If we do not know how to link our work to financial outcomes, we need to find some other way to justify our activities.  These become our organisational performance indicators.  A consulting firm based in Europe has identified that there are 29 organisational key performance indicators (KPIs) to monitor organisational performance, but do not go on to connect their relationship with corporate performance, such as earnings per share or EBITDA.

“The fundamental paradox of any corporation is that even though it competes in the marketplace, it uses nonmarket instruments – plans, commands, controls – to accomplish goals,” is how James Surowiecki explained it in his 2004 book, The Wisdom of Crowds: Why the Many are Smarter than the Few.  The irony is because the connection between organisational management and business results cannot be shown on a spreadsheet, we identify measure that can be shown but do not necessarily link to the business results.

How do we improve our ability to connect the work we do to improve organisational quality to long-term financial performance?  It’s a well-established truism that we do what we measure, so measuring KPIs that do not statistically link to business results may look good but wastes time and can be harmful.  Measuring payroll increase, for instance, is fruitless if it means we have lost experience and company intelligence to lower skills and less experience.

It has taken me twenty years of working with clients to see that – at least part of – the problem is there are no good models or frameworks that help us to direct and measure our efforts effectively.  Several years of thinking and developing later, I have created a model that may help connect work – not just the physical components – to results.

A changed approach begins with how success is achieved in the market – alignment of your customers with your brand promise, and the ability for demand to meet supply.  Typical measures of these activities would be operating profits or EBIT (earnings before interest and tax).

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At the core of alignment is consistency in values.  This means the answers to these questions are never in conflict, no matter which part of the business they are applied to:

1. What does the organisation value? purpose, mission, values, performance, culture, etc.

2. How does it value others? employees, supplier agreements, fairness, reward, remuneration, etc.

3. How does it offer real value through what we deliver? products, service, experience, brand, etc.

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Aligning business activities with values ensures the business delivers consistent results and this is reflected in measures such as the balance sheet and company’s book value.

The organisation connects people to the business.  We who manage organisations are responsible for optimising outcomes for the business and the people engaged in its enterprise.

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This link between the business and the organisation looks like this:

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We develop and manage:

  • The strategy to set the direction and aspirations of the business
  • The structure of the organisation needed to deliver on the strategy
  • The systems that are needed for the business to operate

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The Total Business Value or Market Capitalised Value is the sum the business would realise if it was on the market.  Most companies’ Total Market Value today is close to 80 per cent intangible assets and 20 per cent physical assets.  The S&P 500 currently values it at 88 per cent intangible assets and 12 per cent physical assets.

All intangible assets are produced by the organisation.  They are either ‘products of the mind’ (intellectual property, market research), or ‘products of the people’ (such as know-how, relationships and reputation).  Management of organisations, therefore, is responsible for the production and utilisation of the company’s intangible assets.

The model now shows the activities the organisation carries out on behalf of the business to grow the value of the company’s intangible assets:

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We develop the IAV (intangible asset value) further through:

  • A culture in which the desired norms and behaviours benefit the business
  • Performance that leads to outcomes for business and people
  • Business core competencies that become its strategic advantage

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IAV is difficult to measure, however as we move further away from the industrial economy into a value economy, we need be letting go of outdated priorities.  The assumption today, in the same vein as ‘careful what you wish for – you might get it’, is careful what we measure.  We need to remember that KPIs are only that – indicators – they are not measures of performance.  We need to get used to longer term measures based on numerous sources of value generation within and from outside the business.  Many diverse sources of value generation is only possible when the organisation lets go of its 1900s approach of homogeneity and reductionism.  Standardisation should only apply to process, not to people, not to to jobs, and as technology-facilitated personalisation becomes cheaper, not even to product and service.

The businesses that are serious about their sustainable profitability and growth will need to move on from quantifying inputs and outputs so that the activities that lead to quantifiable outcomes can be achieved.  When the majority of these are produced through the organisation creating intangible asset value, it makes it clearer where we should be concentrating our efforts and how we become more accountable to the business’s results.

Making organisations work

The decision I made to set up a company ten years ago did not entail much deliberation.  It was prompted by little more than not being able to think of a job I wanted to pursue in the work I thought I was good at.  The only thing that I spent time thinking about was the business name.  ‘Meta management’ is a management term that means the management of management to achieve overarching goals.  It is the opposite of ‘suboptimisation’, the process of achieving the goals of a division or component.  Even the most junior employee of any large organisation can tell you that optimised parts do not make up an optimised whole.  When each department has to achieve its own goals, it inevitably comes at a cost to the whole.

My experience was that most performance problems could be resolved through a systems thinking (very simply defined as “two or more parts that work together to accomplish a shared aim”) approach,  ‘Meta Management’ seemed to be the perfect name to describe my new venture.  All I needed to do was to find companies that wanted their problems solved from an organisational rather than divisional, individual or symptomatic perspective.

However, over the years I was increasingly disturbed by our (perhaps subconscious) response to what needs to be acknowledged as our lack of ability.  For all the brilliance of people like Peter Drucker, Henry Mintzberg, Warren Bennis, Rosabeth Moss Kanter and Michael Porter, and the simplicity with which their and others’ matrices, frameworks and models help us to lay out and figure out complex organisational problems, we at the ‘doing’ level, are lost  Knowing what we want to achieve is not translating into knowing how.

Not knowing how is a large part of the reason we persist in using programs and practices (such as these) that do not deliver as they claim, but look as though we are making a difference to the business bottom line.  Our choice has been to limit our focus so that we work in a narrowly defined version of the organisation rather than one that accurately encompasses the business and the people who work in it.  Although the central element of all businesses is financial we lack the understanding and the language of business and finance to quantify our contribution beyond the most basic.  As the Society for Human Resources noted in The Future of the HR Profession, “the only real metric HR has established to measure its work is cost-cutting.”  Unable to quantify the outcomes of our work, instead we quantify the people who do the work.  The shrinking of the definition of the organisation to one that does not include the business and people in holistic ways is evident by the fact that most positions that hold the word ‘organisational’ in their title do not work on the organisation at all.  At best they work on programs that are implemented across the organisation.

On paper, we are upping the company’s collective talent, we are improving productivity and we are increasing worker retention.  Except we aren’t really.  What we are really doing is finding more sophisticated ways to reduce down or remove the people who bring the results down, allowing the numbers to look better.  We turn people into job descriptions because we can produce metrics on skills and outputs.  We turn people into competencies because we can link them to key performance indicators.

If we are prepared to be measured at the humanity level – and considering we make our living from the efforts of people – we should be, it is clear that in failing add real, measurable and sustainable value to business we also fail in our other priority: people.  The figures on disengagement – where in workplaces across the world the engaged are outnumbered by the disengaged at a ratio of 2 to 1 – tell us this is true.  The fact that workers who spend the bulk of their working years with one employer are now disadvantaged as job seekers tells us this is true.  The fact that those who are most likely to be unable to find meaningful work that pays enough for a decent living are predictable, tells us this is true.  We are producing organisational results by shifting the problem to individuals and communities.

The things we cannot easily measure, such as the effect of work on self-esteem, the extent to which we feel valued, our sense of identity and sense of being in control, do not have to be factored in.  This would make it more difficult to produce positive ‘human capital’ results.  The best of our profession fight for organisational practices that support these anyway, but the majority leave the ‘soft’ side of management up to the line managers.  We add these as measures to their jobs, not ours.  The organisational specialists are not meta-managers but have become as suboptimised as any other division in the business.

None of this means that companies should not be able to make decisions that maximise their bottom line.  The question is whether we are actually achieving the maximum bottom line results possible.  Perhaps it is the best we can do under our present processes.  It is not unlike the argument for recycling.  The cost of recycling, including operating costs, chemical waste and pollutants has long been argued to outweigh the benefits.  An estimate in California put the cost difference at $28 per tonne to landfill waste compared to $147 per tonne to recycle.  However this estimate was in 1995.  New processes enabled by greater automation have since brought down the costs to process recyclable waste.  The waste is not ‘recycled’, rather it is ‘upcycled’.  The change in consumer attitudes makes turning waste into new products commercially viable.

We now need to take the same approach with the management of organisations.  Like recycling, we too need a new approach so that the cost of sustainable business and people practices are far outweighed by the benefits.  Having one set of measures for sustainable business and people performance would be a good place to start.  The people over at The Relationship Economy think that would look like this:

 

The answer is as simple as building a new model.  It does not make sense that the organisation can effectively serve the business without properly understanding business, so a new model needs to be one that incorporates the wisdom of those like Drucker who have envisaged how great the organisation can be, with the practical demands of the business.

 

The ‘passion’ nonsense: why it does not predict success

There is no doubt that the internet has made it easier for people to access information to enhance their lives.  Predictably it also enables the faster spreading of nonsense presented as expert advice.  If you believe what you read you there is an undisputed key to success: passion.

Mills & Boon cover

Mills & Boon: an endless supply of bodice-ripping passion

Since when did ‘passion’, the word used to describe desire and lust, become an attribute for commercial or professional success?  A Google search of the phrase “passion leads to success” will give you 209 million – give or take a few hundred thousand – sites explaining how.  Undeniably, it is a compelling story: you loved something so much you willingly ‘went the extra mile’ until one day you were rewarded by success.  It naturally follows that if people attribute their success to their passion, it could be used as a predictor of success too.  By declaring your ‘passion’ for something you are making a statement that your performance is all but guaranteed.  If their authors were not so sincere, the résumés in which job seekers profess their passion would almost be comical.  In one example, a 19-year-old girl supplied an application for an entry-level position in which she managed to state no less than five drivers of her passion including a ‘passion’ for customer service and her ‘passionate’ desire to learn.

Claiming to advise people on how they use their passion to build success is really a free ride for many wannabe coaches and consultants.  You can give this advice with so much authority because who can prove that it wasn’t passion oil that turned the right wheels?  If someone ‘fails’ you can always make the case that they ‘weren’t passionate enough’.

What do the facts tell us?

  • Skills matter.  Failure occurs when a person cannot do something or does not have something needed.  A business needs cash flow, and no amount of love, passionate or otherwise, will pay the bills to keep you in business.  Whole nations have cringed at the singing performances of people whose passion took them to reality television show auditions.  If you cannot sing, you cannot sing, no matter how you feel about it.
  •  Skills can look like emotions.  Highly developed skills become automatic and instinctive.  Nobel Prize-winning author Daniel Kahneman describes in his book, Thinking, Fast and Slow, a human mind consisting of two systems.  System 1 houses our innate skills, while System 2 allocates attention to effortful mental activities.  System 1 not only kicks in when we know the right response, but often when we don’t.  System 1 will make a substitute heuristic (defined by Wikipedia as experience-based techniques for problem solving, learning, and discovery that gives a solution which is not guaranteed to be optimal) response available.  Because System 1 operates so responsively and instinctively it has all the hallmarks of emotion.  Add a dose of immediacy or urgency, and a person can easily  believe that it was ‘passion’ that guided their decision-making or overcame the obstacles to success.
  • Luck plays a huge part.  Like passion, luck can be hard to pin down, so when a person wishes to substitute, “I got lucky,” with “I was passionate,” who is to say it wasn’t true?  In a Forbes article, How to succeed, since success is random, Kare Anderson writes, “Two often intertwined instincts are our deep desire to understand why unexpected things happen, and to want control over the events that affect us or our business.  This leads to another mistaken notion, especially in business. We are eager to believe that the success of a company or individual is determined by what they are doing right.”  When what the person is doing looks like the same thing that everyone else is doing, the explanation needs something else, some personal quality – passion.
  • The strong feelings associated with passion result from the reactions of different regions in the brain.  It might feel as though we are driven to do something because we love it, but it is more likely that we love it because we were rewarded for doing it before.  For example, the mesolimbic pathway rewards new and novel stimuli with sensations of pleasure.  Our brain also draws on different areas to learn associations between certain patterns – like a special person’s voice or the coupling of red wine and chocolate – and rewards.

The ideas we have about passion could also be explained by the rope bridge effect.  In 1974, psychologists Donald Dutton and Arthur Aron conducted an experiment in which male subjects were asked to walk across one of two bridges.  Some crossed a standard footbridge and others walked a rope bridge swaying over a 230-foot drop.  At the end of the bridge an attractive female researcher approached the subjects asking them to complete a questionnaire.  Each interviewer would then hand the subject her telephone number with the offer to be available to help with any questions the subjects may have later.  After controlling for various conditions, such as with the use of a male interviewer, the results showed a significant correlation between the precariousness of the bridge crossing and the degree of sexual content in the responses and the likelihood that the subjects would call the interviewer.  The adrenaline rush triggered by excitement of the rope bridge walk was enough to stir up these subjects’ passions.

Our perceptions of passion which we think drives our actions, could in reality be how we attribute our reactions to the environments our work or business take us to; where there are plenty of novel stimuli, where we our days constantly test us as well as deliver us scores of tiny, and occasionally big, triumphs.

If this is all ‘passion’ for our business or work is all about, many would argue what difference does it make?  So what if it helps people feel better about their jobs or gets them over setbacks more quickly?  It would be the business version of the stone soup folk story (in which hungry travellers enter a village only to find none of the villagers is willing to offer them food.  The travellers take a pot and begin boiling a large stone.  They explain to the curious villagers that stone soup is delicious and if they would be kind enough to provide a few small ‘garnishes’ the travellers would happily share their soup as soon as it was ready.  Various vegetables and seasonings were provided and the hearty soup was enjoyed by all.)

It is not harmless when this advice convinces under-prepared and under-skilled people to make poor decisions.  Investing in a business or leaving a job to ‘follow your passion’ is irresponsible advice when luck and skill play far greater roles.  Teaching people that passion and success are cause and effect does give many people hope and confidence to try something they may not have otherwise.  The value of hope and confidence cannot be underestimated for those who want to make something different of their lives but it is not a technique any more than the laws of attraction promoted in the book, The Secret, is (otherwise there would be a MBA available in this too).

Perhaps our use of the word ‘passion’ has more to do with its original meaning to do with religious martyrdom: ‘pain; to suffer, submit’, hence ‘the passion of Christ’.  For many their passion was their sacrifice.

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