The Most Critical Technology

Making decisions lies at the heart of all businesses. Thousands of decisions get made by everyone in your business every week. The problem is we generally stink at making good decisions. Why?

First of all, we're basically lazy thinkers. As Daniel Kahneman says in Thinking Fast and Slow, we rely too much on our intuitions. And despite what Malcolm Gladwell may lead you to believe, that is a bad thing in the majority of cases.

"..many people are overconfident, prone to place too much faith in their intuitions. They apparently find cognitive effort at least mildly unpleasant and avoid it as much as possible."

Secondly, when we do engage actively our brains, we have a whole host of built-in biases that we have to overcome in order to make decent decisions; including anchoring, status quo, sunk costs, confirming evidence, and estimating and forecasting biases.

In our business, people tend to think of the term technology to mean hardware or software, but technology means more than that.

The practical application of knowledge is a technology in itself. And we need to start applying what we know about the way we think and our biases, to make better business decisions.

Everyone benefits if we do.

Working at the Speed of ADD

Attention Deficit/Hyperactivity Disorder (ADHD), more commonly known as Attention Deficit Disorder (ADD), is a neurological condition that has a genetic component and can be aggravated by environmental and physical factors. The negative characteristics of ADD include a tendency to procrastinate and miss deadlines, impatience, and an inability to focus among other traits.

There is now a newly recognized neurological phenomenon, which is a cousin to ADD, called Attention Deficit Trait (ADT):

“Marked by distractibility, inner frenzy, and impatience, ADT prevents managers from clarifying priorities, making smart decisions, and managing their time. This insidious condition turns otherwise talented performers into harried underachievers. And it’s reaching epidemic proportions.

ADT isn’t an illness or character defect. It’s our brain’s natural response to exploding demands on our time and attention. As data increasingly floods our brains, we lose our ability to solve problems creatively and handle the unknown. Creativity shrivels; mistakes multiply. Some sufferers eventually melt down.”

Edward M. Hallowell, MD

Overloaded Circuits, Harvard Business Review, January 2005

If ADT is growing at the personal level from factors at work, is it a stretch to think of organizations themselves as having ADHD? Have a look at the typical symptoms of ADHD and see if any fit:

My guess is that you'll see a lot of traits on that list that we've come to expect at our workplaces.  No matter what industry or size, information overload is affecting us all:

Perhaps the biggest implication of our new speed is what this is doing to our lives, and in particular to our brains. Recently, I was in the boardroom of a government organization outside the U.S. that was in charge of regulating what should be a slow-moving industry. They were decades old, with around 10,000 employees and mountains of money. Their biggest challenge? "Our people are so overwhelmed, no one has any time to think, it's all too much," their executives explained.

David Rock, cofounder of the Neuroleadership Institute, a consultant and author of Your Brain at Work.

We all need to focus, shut down every day and decrease the amount of needless and useless information stimulation that is getting in the way of important and productive work.

See more from David's excellent article on the Fortune website. 

The Engagement Gap

We define employee engagement (a term that is widely used and misused) as an employees’ willingness and ability to contribute to company success. And the current level of employee engagement isn’t good.

An excerpt from Gary Hamel’s blog at the Wall Street Journal, entitled Management’s Dirty Little Secret:

“Consider the recent “Global Workforce Survey” conducted by Towers Perrin (now Towers Watson), an HR consultancy. In an attempt to measure the extent of employee engagement around the world, the company polled more than 90,000 workers in 18 countries. The survey covered many of the key factors that determine workplace engagement, including: the ability to participate in decision-making, the encouragement given for innovative thinking, the availability of skill-enhancing job assignments and the interest shown by senior executives in employee well-being.

Below you’ll find some supporting graphics taken directly from Towers Watson’s most recent (2012) instalment of the study:

Unfortunately, these results aren’t uncommon or new. Peter Drucker was quoted some time ago as saying, “Most of what we call management consists of making it difficult for people to get their work done.”

But the path to addressing this problem is under our control according to research conducted by Teresa M. Amabile and Stephen J. Kramer:

“Ask leaders what they think makes employees enthusiastic about work, and they’ll tell you in no uncertain terms. In a recent survey we invited more than 600 managers from dozens of companies to rank the impact on employee motivation and emotions of five workplace factors commonly considered significant: recognition, incentives, interpersonal support, support for making progress, and clear goals. “Recognition for good work (either public or private)” came out number one.

Unfortunately, those managers are wrong.

Having just completed a multiyear study tracking the day-to-day activities, emotions, and motivation levels of hundreds of knowledge workers in a wide variety of settings, we now know what the top motivator of performance is—and, amazingly, it’s the factor those survey participants ranked dead last. It’s progress. On days when workers have the sense they’re making headway in their jobs, or when they receive support that helps them overcome obstacles, their emotions are most positive and their drive to succeed is at its peak. On days when they feel they are spinning their wheels or encountering roadblocks to meaningful accomplishment, their moods and motivation are lowest.

“You can proactively create both the perception and the reality of progress. If you are a high-ranking manager, take great care to clarify overall goals, ensure that people’s efforts are properly supported, and refrain from exerting time pressure so intense that minor glitches are perceived as crises rather than learning opportunities.

Cultivate a culture of helpfulness. While you’re at it, you can facilitate progress in a more direct way: Roll up your sleeves and pitch in. Of course, all these efforts will not only keep people working with gusto but also get the job done faster.”

Teresa M. Amabile is the Edsel Bryant Ford Professor of Business Administration at Harvard Business School. Steven J. Kramer is an independent researcher and writer based in Wayland, Massachusetts

In short, we believe Towers Waston summarized it best in their report:

Companies are running 21st-century businesses with 20th-century workplace practices and programs.

beacon and the Engagement Gap

How does beacon help battle the Engagement Gap? We simplify, support and automate a set of complementary, evidence-based, high-performance work practices, which includes; ensuring that goals are clear, people’s efforts are properly supported, progress is easy to measure and see, and that collaboration occurs to execute the most important work.

Closing the Strategy-to-Performance Gap

You know this story….

You and your leadership team spend months putting together your yearly plan leading up to the start of your coming year through off-sites, conference calls, one-on-one meetings, cascading team meetings, summary meetings, draft plans and budgets and then final plans and budgets.

These all get summarized in a handy presentation, spreadsheet or printed binder and it promptly get’s filed while people go back to doing “their real work.” Then, when the next quarter-end comes around there’s a collective “D’oh!” as people recall what they said they’d do in the plan, but didn’t quite get around to it yet. Sometimes this goes on for years.

In 2004, the Economist Intelligence Unit, in collaboration with Marakon Associates surveyed senior executives from 197 companies worldwide and published the startling results in the Harvard Business Review:

“Most strategies deliver only 63% of their potential financial performance. And more than one-third of executives surveyed placed the figure at less than 50%.”

Where does the performance go? A lot of it gets lost in translation.

How does beacon help to close the Strategy-to-Performance Gap?

 We simplify, support and automate a set of complementary, evidence-based, high-performance work practices, that ensures very little gets lost in the translation of your strategy on the way to execution. And when your plan gets “hit” from unexpected events (because no plan survives first contact with the enemy), you can quickly adapt and bring everyone along.

Contact us for more details

Death By Growth

There is no easy way to say this, organizations don't scale well using traditional management practices. In fact, the returns on productivity for adding more people are actually sublinear; which means adding a person doesn't get you a full person's contribution. Just listen to what Geoffrey West, Distinguished Professor and Past President of the Sante Fe Institute has to say about it:

"After buying data on more than 23,000 publicly traded companies, Bettencourt and West discovered that corporate productivity, unlike urban productivity, was entirely sublinear. As the number of employees grows, the amount of profit per employee shrinks. West gets giddy when he shows me the linear regression charts. "Look at this bloody plot," he says. "It's ridiculous how well the points line up." The graph reflects the bleak reality of corporate growth, in which efficiencies of scale are almost always outweighed by the burdens of bureaucracy. "When a company starts out, it's all about the new idea," West says. "And then, if the company gets lucky, the idea takes off. Everybody is happy and rich. But then management starts worrying about the bottom line, and so all these people are hired to keep track of the paper clips. This is the beginning of the end."

The danger, West says, is that the inevitable decline in profit per employee makes large companies increasingly vulnerable to market volatility. Since the company now has to support an expensive staff -- overhead costs increase with size -- even a minor disturbance can lead to significant losses. As West puts it, "Companies are killed by their need to keep on getting bigger."

As the graphic, excerpted from a McKinsey study, illustrates exactly what West and Bettencourt found. As companies grow, their profit per employee drops. Yes, these are very large enterprises. Does this occur on a smaller scale? Our first-hand experience working with enterprises as small as 25 would indicate it does.

The next obvious question is how can you contain the "burdens of bureaucracy" so growth doesn't kill your organization? If so, how?

Something to consider as you grow your team or enterprise.

Closing the Science-to-Business Gap

 If you think of the items we have outlined in the Noise section as symptoms, the Science-to-Business Gap should be classified as one of the diseases that causes these symptoms. I'll write about four other diseases in future posts (Sublinear Productivity, Strategy-to-Performance Gap, The Engagement Gap and Organizational ADHD). Each of these produces a number of unwanted symptoms and impediments to good performance in your organization. If you can head these off before they take root then you'll be ahead of your competitors.

“If we want to strengthen our companies, elevate our lives, and improve the world, we need to close the gap between what science knows, and what business does.”

Daniel Pink

Drive: The Surprising Truth About What Motivates Us

Closing the gap between research and practice (or what science knows and what business does) represents a change from the dominant approach to management behaviour – which operates more on intuition, anecdote and experience. 

“Most managers are notoriously subjective, prone to manage by anecdote, quick to adopt best practices, and fond of big, visible initiatives...” McKinsey Quarterly, 2006, Number 3

And if we want to move away from commonly used management practices, we need to understand that change itself is a difficult process.

According to the authors of Switch and Made to Stick, “the primary obstacle is a conflict that's built into our brains. Psychologists have discovered that our minds are ruled by two different systems—the rational mind and the emotional mind—that compete for control. The rational mind wants a great beach body; the emotional mind wants that Oreo cookie. The rational mind wants to change something at work; the emotional mind loves the comfort of the existing routine. This tension can doom a change effort—but if it is overcome, change can come quickly.”

The second part of the challenge is answering the question, “what do we change TO?” If you are operating based on experience and intuition now, what approach do you rely on? Do you just pick one of the billion books out there trying to sell you on the latest management fad (while selling out theatres on the rubber chicken circuit)?

Our goal is to avoid any whiff of a fad and stick to the properly-researched territories. So, rather than follow any “model” which espouses particular techniques, we like the approach of Evidence-Based Management, which “is a commitment to finding and using the best theory and data available at the time to make decisions.” We see this as a practical way to bridge the gap between science and business.

The 5 Principles of Evidence-Based Management

1. Face the hard facts, and build a culture in which people are encouraged to tell the truth, even if it is unpleasant.
2. Be committed to "fact based" decision-making -- which means being committed to getting the best evidence and using it to guide actions.
3. Treat your organization as an unfinished prototype -- encourage experimentation and learning by doing.
4. Look for the risks and drawbacks in what people recommend -- even the best medicine has side effects.
5. Avoid basing decisions on untested but strongly held beliefs, what you have done in the past, or on uncritical "benchmarking" of what winners do.

There is a significant movement in medicine to apply Evidence-based Management. We think it's time for businesses to catch up.