The One Thing that will Indisputably Improve Enterprise Performance

The number of books, papers, websites, videos and the like, that profess “if you do this, you will be a top performing enterprise,” are laughable. Every self-anointed guru has their sure-fire way to “perform like Apple” or alternately “perform like Google.”

Most of it is complete crap.

Why? Because reverse engineering enterprise performance is as close to impossible as you can get. There are so many factors at play in any market - much of it unknown (even unknowable) to the enterprise and it’s people - that drawing a definitive causal link between a certain action or capability and performance without considering all the potential environmental influences requires a great deal of hubris or naïveté.

Political, economic, social, technological, environmental, and legal factors are the first and most obvious things to consider. But then you have to account for small decisions made throughout the enterprise, competitive actions, consumer sentiment, micro trends and even luck and probability.

Wait, you have the one and only algorithm that factors all these attributes in and has been proven to be right 100% of the time? Uh huh. Maybe you should try predicting the weather with it. Because that’s just about the complexity of the challenge we’re talking about.

We don’t live in a “ceteris paribus” kind of world where you can isolate enterprise performance in lab conditions. Nothing is ever equal. And given the speed and ferocity of our current markets, it isn’t getting any easier.

So, how can I write in my title that there is something that can indisputably improve enterprise performance? Because while we can’t effectively isolate performance at the enterprise level in active markets, we can isolate performance at the team and individual level.

Does your company rely on people to generate it’s profits? Then you need to consider the conditions you are creating for your people and teams. Your job as a leader or manager is to continuously improve the conditions for individuals and teams and the development of their capabilities so the enterprise can perform better.

That is the one thing, that indisputably, drives enterprise performance. Establishing the preconditions and conditions for others to succeed. Helping your people do the most important things well. Of course, that "one" thing is comprised of many when you crack it open.

Yes, as leaders you need to make a call on what the most important things are, and that isn’t easy. And there may not be any roadmaps for that part.

But then it’s up to you to create the conditions where your people can excel. And there is plenty of good evidence to follow when it comes to creating high performance conditions. However, there is a good chance you might need a bit of a refresher in this area, as the science has improved vastly in the past 15 years.

Much like our understanding of everything else.

 

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One Bar Closer to Humanity

The potential exists for technology, both at home and work, to positively impact our lives. I don't think the net effect of technology is presently positive. Social applications prey on negative and addictive aspects of our personalities and create new (bad) neural pathways that reinforce these addictions to validation, attachment and self-promotion...but this says it so much better than I can.

Nicely played.


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Roger Martin is Wrong - Part II

Let me say again that I'm a big fan of Roger Martin.

In fact, given a couple Twitter exchanges over the past few months, I'm an even bigger fan. He's got a good sense of humour.

But let's return to the source of our Twitter debate that was sparked by my last blog post. Is the world more VUCA (Volatile, Uncertain, Complex and Ambiguous) now, than it has been in the past? Here's an excerpt of our VUCA Twitter conversation:

I also agree with Roger that I have access to better graphs relating to today's situation than we do for past eras, so I figured I'd pile some more of those on.;)

Economic, financial and social interconnectedness are on the rise. Thanks to the Internet and its enabling infrastructure, that feeling we all have that the world is smaller, is more than just a feeling.

Erik Brynjolfsson and Andrew McAfee, The Second Machine Age

Erik Brynjolfsson and Andrew McAfee, The Second Machine Age

And speaking of enabling infrastructure, the technology that is connecting us is getting so powerful and sophisticated, so quickly, we are able to facilitate interactions in ways that were "inconceivable" in the early nineties. 

This interconnectedness, supported by an ever-more-sophisticated infrastructure is creating complexity for organizations that they seem content to pass on to their employees. Instead of responding with more focus and clarity on the things that really drive performance, organization's seem content to pile-on more. I guess they don't buy into Pfeffer and Sutton's contention that:

“The foundation of any successfully run business is a strategy that everyone understands coupled with a few key measures that are routinely tracked.”

I think there is decent evidence that we live in a more VUCA world than in previous eras, and it is impacting all of us at work. I'm prepared to be wrong, as Roger believes I am, however.

What do you say? We'd love you to contribute to the conversation.

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Roger Martin is Wrong

I know what you're thinking...who the hell is this guy telling us the great Roger Martin is wrong!? And you would be right. But consider the following before you dismiss me out of hand.

In another excellent HBR blog post concerning the shortcomings of Adaptive Strategy, Roger makes the statement that, "There is really no actual evidence that ours is a more VUCA world than previous ones." You'll no doubt recall that VUCA is a favourite buzzword/acronym being used these days describing an operating environment for business that is Volatile, Uncertain, Complex and Ambiguous.

For the record, I'm a big fan of Roger's, and I love his recent addition to strategy literature (along with A.G. Lafley) entitled, Playing to Win: How Strategy Really Works. And I don't disagree with the main assertion of his post that Adaptive Planning is a cop-out. But evidence is something we take seriously here. And in this case, I think there is decent evidence that we do live and work in a more VUCA world than previous ones.

While I believe there are several ways to go about proving this, I’m going to stick to a few areas we know a little something about rather than straying too far into more abstract economic factors like the power of multinational corporations, the near-frictionless movement of capital, the ability of emerging economies to leapfrog others with newer technologies, or the severity of economic impacts due to global warming.

We’ll focus instead on factors that have changed forever in our work lives, or are at historical levels, which represent never-before-seen conditions. We will not tackle the “why” of each of these conditions in this post. That’s a serial-post venture.

 

 

Work Has Changed

Our economies are driven more now by information work than by physical work. This has a number of downstream effects on both macro or business environment-level conditions as well as internal organizational dynamics. Again, we won’t discuss these here, but the type of work most of us now do is not the same as in previous eras.

 

Mobilizing Minds: Creating Wealth From Talent in the 21st Century Organization, Lowell Bryan & Claudia Joyce

Mobilizing Minds: Creating Wealth From Talent in the 21st Century Organization, Lowell Bryan & Claudia Joyce

 

Interaction Costs Are Plummeting

I won't bore you with the history behind Interaction Costs except to say that Ronald Coase received a Nobel Prize for his work in the area. His theories included the idea that a firm will continue to expand until the cost of doing business with external parties is cheaper than it would be having the work done in-house. Explained another way, you won't hire people to do a job as an employee if you can get the service cheaper from a sub-contractor or outside service provider. And when that happens, your firm stops adding people.


So, as the composition of our work becomes driven more by information, and the costs of processing and transacting continue to drop, the pressures on businesses to synchronize their size with the market realities continues to intensify.


Mobilizing Minds: Creating Wealth From Talent in the 21st Century Organization, Lowell Bryan & Claudia Joyce

Mobilizing Minds: Creating Wealth From Talent in the 21st Century Organization, Lowell Bryan & Claudia Joyce

 

People Are Overwhelmed

I think this is something we all feel intuitively. Given the move to information-driven work, the dropping interaction costs and the skyrocketing connectivity of the worldwide population means things are just getting more and more frenetic at work.

 

 

Market Leadership is Shorter-lived

Any company executive worth their salary understands the growing science behind market disruption. We’ve seen it repeated time and time again from the largest industries like automobiles to retail store niches.

Each of these factors contributes to decreasing barriers to entry in markets and the ability of competition to emerge from anywhere.

 

 

People Being Displaced in Market Disruptions

One factor driving the massive increase in long-term unemployment is the rapid change in employment opportunities now available. The move from Physical to Information work and rapidly shifting market boundaries has left many people on the sidelines with skills that do not match current market opportunities. Whatever the full reasons behind the situation, we’ve never seen long-term unemployment like this.

 

More VUCA or Not?

If I were to argue against myself I could say that these things indeed are different, but in totality the amount of VUCA is not markedly different than in previous times. Rather, it's just the underlying causes of VUCA are different but the aggregate total amount of VUCA is the same.

Or, are we connecting random bits of data which don’t sum up to a more VUCA world than previous ones?

What do you think? We’d love to hear your view.

 

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Holacracy vs. Boring Old Ideas

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If you're a follower of innovative leadership or management practices, you'll no doubt have seen some of the breathless statements about Zappos' planned (or impending) move to Holacracy. What's a Holacracy? I won't spend your precious time recounting what others have covered except to say it is being hailed in the press as an innovation in management that aims to get rid of managers and hierarchy.

Let me address that last sentence I just wrote. Firstly, the press - in particular the tech press - lives off the "new" and "innovative" but has collective amnesia when the same things are "discovered" over and over again. Secondly, the press doesn't have it quite right, as usual. Holacracy doesn't really get rid of hierarchy, as it is being reported, it just distributes it. These aren't really new ideas at all. The packaging is good though.

This quest for newness extends from the press into companies where jumping from fad to fad does nothing but demoralize, disinterest and frustrate people who have to go through it. In truth, there is very little that is new in the management and leadership realm that isn't known. The problem is, people don't publish their sources of where the ideas actually come from because...well, I'll refrain from speculating on that.

Stanford's James March's quote is particularly applicable in this case:

"Most claims of originality are testimony to ignorance and most claims of magic are testimony to hubris."

I love the fact that Zappos is being experimental as an organization. And I'm impressed that they are making a bold move to further empower their people to be freed from constraints so they can perform to their potential. I would be lying if I said I wasn't a skeptic, however.

For those intrepid souls willing to investigate, there are many well-known, longstanding management practices and approaches that create the conditions for high performance. Most organizations will disregard these for the "flavour of the month," and that can be costly to everyone.

Give me the boring old ideas that have been proven to work. 

 

P.S. Have a look at Bob Sutton's post at LinkedIn for further discussion and enlightenment.

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Clarity Begins With What You Don't Notice

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Meta-cognition. Thinking about thinking. In today's harried, data-soaked world, we rarely get time to think about how we think. The holidays are a good time for that.

If we don’t notice what we don’t notice, we’re much more likely to fall prey to poor decision-making and groupthink. I’ve written about decision-making before, so let’s look at groupthink.

Groupthink is an interesting phenomenon. What is it exactly? I'll rely on Daniel Goleman's description in his latest (excellent) book, Focus: The Hidden Driver of Excellence. When speaking of the financial meltdown and the subprime derivatives scandal:

"Of course, seemingly very smart people did invest in those derivatives, ignoring the signals that they were not worth the risk, and emphasizing whatever might support their decision. When this tendency to ignore evidence to the contrary spreads into a shared self-deception, it becomes groupthink. The unstated need to protect a treasured opinion (by discounting crucial disconfirming data) drives shared blind spots that lead to bad decisions."

Daniel Kahneman also writes about groupthink in Thinking Fast and Slow and in particular how people so easily dismiss disconfirming data and continue on as they always have. Groupthink begins with the unstated assumption that we know everything we need to know.

In Kahneman’s book, he recounts research he conducted when looking at a financial advisory company for high net worth individuals. He was granted access to 8 years of investment results for 25 investment advisors. His conclusion was that none of the advisors was consistently any better than the others at managing the clients’ money. The results were no better than chance.

Yet, when bonus time came around, the executives were “rewarding luck as if it were skill.” When told of the results of Kahneman’s research, it was quickly disregarded. According to Kahneman, “facts that challenge such basic assumptions - and thereby threaten people’s livelihood and self-esteem - are simply not absorbed.”

The research on the effectiveness of traditional management practices aren’t any different than those of the financial advisors above. 

And not surprisingly, the evidence is simply not absorbed.

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What's a Person-Hour Worth?

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As a leader, how do you value the contributions of your people? How do you value an hour of their time? For that matter, how do you value an hour of your own time?

If you're anything like most enterprise leaders that we've met, you guard your time very jealously. Do you do the same for your people?

“It would be difficult to overstate the importance of focusing on knowledge workers’ productivity. The critical feature of a knowledge workforce is that its workers are not labour, they are capital. And what is decisive in the performance of capital is not what capital costs. It is not how much capital is being invested – or else the Soviet Union would have easily been the world’s foremost economy. What’s critical is the productivity of capital.”  Peter Drucker.

If we were to look at the Opportunity Cost of an hour's time, maybe we'd act a little differently? If you compared an hour at work with what you could be doing with that hour instead, like being with family or friends? Time is something we don't get back, regardless of where we sit in the organization. If we are going to value the contributions of our employees properly, we need to respect the Opportunity Cost of requiring their time to do wasteful or ineffective things. 

Jeffery Pfeffer, noted Stanford professor, scholar and author states,

“There’s a disturbing disconnect in organizational management. On one hand, research, experience and common sense all increasingly point to a direct relationship between a company’s financial success and its commitment to management practices that treat people as assets. Yet even in the face of this mounting evidence, trends in management are actually moving away from these very principles.”

We should get a little pissed that we're taking something that can't be given back when we lead or manage in a way that is wasteful or ineffective. Just as we would if it were happening to us.

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Wishing won't make it happen

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Getting things done in organizations can be difficult. There seem to be a million reasons why people don't deliver. Among our favourites are the promises made during or after meetings like, "I'll get that done prior to our next meeting" or, "I'll get to that this week." And then the vow is quickly forgotten and not delivered. Sometimes the same vow is made over and over and continues to go unfulfilled!

Research lead by Peter Gollwitzer shows that vowing to do something is often useless. What works is making concrete and vivid plans that include answers to the following: "What is the problem you have to confront?" "When will you follow through on your plan?" "Where will you do it?" and "How will you do it?"

Further research conducted by Dr. Gail Matthews provides empirical evidence that writing goals down, making concrete action plans, and sharing them with others generates the highest levels of accomplishment.

Based on our own research, we would go even further to suggest that adding an specific, externally verifiable metric which accurately gauges success (or lack thereof) will also deliver higher levels of accomplishment, or at the very least drives learning.

Otherwise, you're more likely to fall into the human tendency to rationalize any outcome as more or less what you expected.

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Avoiding Failure: Two Areas to Mind

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I believe the quote by Churchill goes something like, "success consists of going from failure to failure without loss of enthusiasm." Some people can't do that.  Turns out it's a mindset thing.

Carol S. Dweck, the Stanford psychologist, researcher and author of Mindset, The New Psychology of Success is a favourite of ours. Her work is excellent and incredibly important.

Are you in a fixed-mindset or growth-mindset workplace? Do you feel people are just judging you or are they helping you to develop? Maybe you could try making it a more growth-mindset place, starting with yourself. Are their ways you could be less defensive about your mistakes? Could you profit more from the feedback you get? Are there ways you can create more learning experiences for yourself?

In our work helping people to implement Evidence-based management, an understanding of mindset's is vitally important because putting effective practices in place in an organization can be challenging if people don't understand their own mindset. Do they feel metrics are just set up to judge them? Or, are they looking at them as an opportunity to learn and grow while helping the organization?

Matthew Lieberman, one of the founding fathers of a field called social neuroscience, brings another apparently "soft" characteristic to light in in his new book, Social: Why Our Brains Are Wired to Connect.

As explained by David Rock in his Fortune article, people's drive to be rational agents is only half the story. We also have a drive to be social. "We have hired and promoted generations of managers with robust analytical skills and poor social skills, and we don't seem to think that matters."

"A lack of social skills is behind some of the biggest challenges in organizations. Starting from the top, if leaders are not good at understanding others, they are likely to develop a strategy and expect everyone to get on board, without stopping to imagine how others may feel about that plan. In fact, just 30% of change initiatives succeed, according to 15 years of data from McKinsey & Co."

While good evidence tells us that using metrics effectively throughout the organization to clarify and focus efforts is critical for high performance, it can't deliver the optimum results unless we all understand the implications of personal mindsets and our need to factor in human needs as well as the numbers. As usual it's simple, it just isn't easy.

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Spreadsheets: The Devil's Device

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Spreadsheets are the perfect device for those looking for trouble.

On the surface, they appear to be straightforward, easy and well-intentioned. How else can you explain their widespread use as a management tool?

Yes, spreadsheets can be fantastic for number-crunching. But even here they have a dark side, as people start to think their “models” represent, forecast, or predict what will actually happen. It’d be nice if things were that simple and predictable.

I’m not sure if it’s the long history of the spreadsheet that has lead to its ubiquity and widespread use for almost anything? Or, is it the universality of the columns and rows format as an organizing structure that just invites it’s use as a default tool?

Whatever the answer, we see even the largest, seemingly sophisticated enterprises using spreadsheets to communicate and manage their strategies and their execution.

This is surely the work of evil. You get sucked in by thinking it’ll be easy to do because you know how to use spreadsheets and it’s easy to create an indented hierarchy of strategies/objectives/targets/etc.

Now it’s got you. You’re committed. You’ve chosen your tool, invested time, input important content and maybe even emailed it to your team...now they’ve been invited into your special circle of spreadsheet hell.

What could possibly go wrong?

Localized not Centralized

Great for the first, one-way download. But then try consolidating changes, roll-up’s or keeping everyone focused what’s important now.

Multiple Versions

There is immediately a problem keeping alignment and focus consistent as multiple versions proliferate and out-date themselves.

No Change History

Forget about answering the question, “How did we get here?”

 Multiple Points of Failure

Any hardware failure, or email mistake or breach, and important information is lost or compromised.

Singular, Not Collaborative

What was done, by whom, and what did we learn individually and collectively? Difficult, if not impossible.

Not Scalable

If you want to cascade your leadership and management system to others easily across your enterprise, you compound each of the above problems.

Viewing Privileges Challenge

You want to easily share some relevant information to some of your team or partners, but keep other information out of view? Sorry, not that easy.

Not Adaptable

Sometimes, in business, events occur (that don’t perfectly coincide with year-end) that require you to rethink and re-prioritize what needs to be done. Try changing and prioritizing on-the-fly while still keeping everyone synchronized with spreadsheets.

Opportunity Cost

If you calculated all the time required to update, consolidate and report on all the spreadsheets, it’d be significant. But imagine what could have been done with that time if used driving performance?

Spreadsheets are great for what they were intended to do. We have seen some pretty incredible implementations of macros over the years which generate some very useful numerical insights. But with management systems, the Devil is in the details. And that’s precisely where spreadsheets can get you into trouble.

 

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