In the last century management’s overwhelming focus was efficiency. An industrial mindset influenced our definition of effectiveness to be driven largely by delivering more for less.
The influence was straight forward. The efficiency of a machine is how well it turns inputs into its fixed outputs. If a machine’s quality is stable (a risky but common assumption), then a focus on efficiency works as a proxy for effectiveness. Effectiveness slipped from sight in a period of unmet consumer demand, long growth and expanding global markets. We focused our organisations almost solely on efficiency. When changes in effectiveness were required, they came in the form of new disruptive innovators and innovations that rewrote the quality definition and a focus on efficiency resumed.
Human effectiveness cannot be defined as simply as that of a machine. Our traditional industrial machines turn simple inputs through process steps into fixed outputs. Humans can be reduced to that work too. For many organisations it became the goal of human work to make it fixed, repetitive and predictable. It is not a surprise that they discovered that the quality of this repetitive work was rarely stable.
Humans are capable of more than machine work. We are also capable of turning complex and diverse inputs into a simple open-ended output, like an action, a decision, a sentence, a service, a piece of knowledge or a song. Suddenly we can’t assume that inputs are consistent, quality is stable and that outputs are known. Our proxy has broken down and we need to return to a more direct focus on effectiveness.
The last decade has seen the slow rise of effectiveness as a management challenge and management grappling with new skills:
quality movements, continuous improvement and other disciplines have revisited the assumption around stable quality and even stretched to query whether the predetermined output matches what customers need
customer experience, design and similar disciplines have begun to look at the potential to shape new and better effectiveness of our products and experiences.
increasing focus on disruptive innovation has raised the challenge of why the traditional model must break and new strategy models query the narrow focus on efficiency vs other ways to achieve greater effectiveness (see Blue Ocean Strategy, Roger Martin, etc)
realisations about the shifting nature of work has caused many to reflect on whether efficiency is the best or at least only model for connected knowledge workers or any other role.
consumers questioning the need, quality, sustainability, morality, environmental and social impact of the products of industrial machine models
examining new models of leadership, organisation and development of people that encourage the development of true human effectiveness and realise untapped human potential.
rearguard actions to find ever more efficient machines (robots, big data, management algorithms, etc) that can replace humans in increasingly complex roles and work.
Responsive organisations recognise that the proxy of efficiency for effectiveness is fundamentally broken. The skills of efficiency remain relevant but they can no longer replace a focus on effectiveness.
The rise of effectiveness is on us. Our challenge is to adapt our approaches to work to make the most of our opportunities, not just to minimise our waste.
The levers of competitive advantage drive evolutionary change in business. As our economic society changes with new transportation, energy and information technologies relative advantage shifts and the thriving business change. With the proviso that any gross generalisation is untrue in a particular case, here’s a brief sweep over economic history.
Before the 19th century, an organisations best competitive advantage was its location. Transportation, energy and information costs made location a critical and often insurmountable advantage.
In the 19th century, an organisation’s best competitive advantage was ownership of an asset or technology. New energy sources, new information channels and new transportation options enabled new scale in monopolies and new returns from asset ownership.
In the 20th century an organisation’s competitive advantage was its efficiency in use of information and processes. Global consumer markets and long periods of economic growth rewarded those who optimised their execution for efficiency to reach these markets at a cost or margin advantage.
Now an organisation’s competitive advantage is its people. Organisations need the mindsets, culture, talents and other capabilities to adapt each day to a world of information transparency, global networked connection and rapid change. The effectiveness of people matters even more, if business must adapt to new approaches to use of energy. The effectiveness of a Responsiveorg comes from every employee better leveraging their information, networks and capabilities.
“the 21st century definition of a startup: A startup is a temporary organization designed to search for a repeatable and scalable business model… The corollary for a large company is: A company is a permanent organization designed to execute a repeatable and scalable business model.”
These definitions are useful and highly accurate. Most large organisations have chosen to focus on efficiency in execution of a business model as the rationale behind their efforts.
However, it is important to note that a corollary may follow but does not always preclude other logical alternatives. Breaking apart Blank’s structure there are a number of different elements in play:
the duration of the organisation: temporary vs permanent
the process of the organisation: search vs execution of a repeatable and scalable business model
an implicit difference between effectiveness of a search and efficiency of execution
Importantly there are other options that could be chosen for these spots in Blank’s definition:
Rather than looking at duration we could look at the ability of the organisation to change – adaptability with a scale from the highly adaptable startup to the fixed processes and systems of efficiency oriented large scale organisations.
Rather than focusing on process efficiency we could focus on effectiveness of process at achieving purpose – no scalable business models is permanently enduring; they must be subject to eternal change to be more effective and to better achieve the outcomes for which people came together.
From this we can see that there is at least one more logical model to chose. Let’s define a responsive organisation thus:
“a responsive organisation: is an adaptive organisation designed to search for more effective ways to execute a repeatable and scalable business model.”
Blank is right that you can’t behave like a start-up if you are trying to be efficient in execution and startups should not be judged by efficiency of execution. However there are more than two models for an organisation to choose. Large organisations can be responsive but they need to choose to adapt and be more effective.
The story famously goes that there are three kinds of people:
those who make things happen
those who watch things happen; and
those who ask ‘what happened?’
In the transformation called digital disruption, these are matched by three groups:
disruptors (& their customers) creating new measures of effectiveness, success and performance
organisations outwardly focused, measuring a wide range of results and wondering why it seems the measures of success have changed; and
the disrupted announcing the disruption can’t last because they are performing fine on their plans and the change doesn’t work on their measures of success.
The surest way to be blindsided by digital disruption is to fix your attention only to your metrics and to your plan.
“You can’t bank a percentage” – entrepreneurial wisdom
Disruptive businesses change the metrics that measure success by focusing on more effective outcomes. How are you rethinking the measures in your business?
Your Metrics Weren’t Always Thus
Metrics are one area where we can easily form views that they ‘have to be this way’. Metrics are often driven by prior year plans, industry standard comparisons or by the expectations of analysts and investors. It is taken as gospel for businesses and industries to have standard growth rate, cost to income and other metrics.
If you want to get a sense for the changing dynamic of metrics read back in the history of business to completely different eras. Here we can see innovation in metrics changes the fundamental understanding of business activity.
If you read the biographies of early industrialists and railroad barons in the US you will find a very different perception of shareholder value and company performance. Shares in the late 19th century in the United States traded like subordinated bonds. The questions of valuation were how large was the dividend the company might pay and how close the shares traded to par. Innovations like consistent approaches to value accounting practices and models of cashflow valuation were introduced to sustain the modern approaches to valuations.
Metrics Illuminate and Create Blindspots
Metrics are how businesses see. As they say, if you want something done, measure it. However, the light that measures cast also creates shadows and blindspots. What doesn’t get measured, doesn’t get done.
A fixed view of metrics makes them a fertile ground for entrepreneur change. The traditional competitors will struggle to see and understand the performance of new businesses because they will be trapped judging the new threat by old metrics.
There are many examples of innovations that change the metrics. Here’s a small sample:
Craig McCaw built up and sold huge businesses in both cable television and mobile telephony by having a more effective view of valuation to that prevalent in each industry when he started
Online display advertising was sold by effectiveness (cost per click) rather than (cost per thousand). New measures that made it hard for traditional media to see a way to respond to the changes
Many industries are dealing with competition that does not value the unit of content or service, but instead values the community of users that is created by giving away the content or service.
The taxi industries around the world are faced with moving from the value of a licence and a cost per km to the utilisation of and returns to a driver as a measure of effectiveness
Changing the unit of measurement of delivery effectiveness to time enabled courier services to change the game in parcel delivery
Traditional businesses with their measures of success will often miss these changes initially or see them as unsustainable. If you are assuming the irrationality of your competitors, look again at their metrics. Ultimately, new valuation models and new investor expectations develop around the new metrics provided that they prove more effective.
The worst outcome for the future of your business is that you are happily delivering your plan as the value erodes away.
Don’t accept as gospel the returns, growth rates and margins that you have inherited in your business. You can’t bank a percentage. Focus instead on exploring with new metrics to measure the effectiveness of your business in creating sustainable value.
The only thing as a manager that you can’t fix is the discovery that you should have started yesterday. Working to create an effective culture is not a realm for the fast follower. Start!
All the Fast Followers
A fast follower mindset dominates much strategic thinking in business. It may not always be explicit, but successful practices are widely followed.
Nobody wants to bear the pain, the effort and the risk of the bleeding edge. Too many of the inventors failed to win the execution challenge. Once a successful approach has been identified it can be rapidly copied. Fast followers compete on execution. Fast following is seen as a safe play with only the danger that you give your competitor a small advantage for the period of time it takes to copy the approach.
You Can’t Fast Follow Culture
Your culture today is different to your competitor’s culture or your role model organisation’s culture. There is a reason you still haven’t caught up to the impact of those GE practices that you are trying to follow (A reminder: Jack Welch retired 14 years ago).
What will be effective in your organisation differs from what works in another company. Experimentation is required to find the ideal set of behaviours for the purpose, people and strategy of your organisation.
Even if a practice could be guaranteed to work, implementation of cultural change takes time. There is no purchase to make, no switch to flick or no announcement that will let you catch up on an advantageous culture as a fast follower.
Culture is an expectation of how interactions happen in the networks of your organisation. Networks are one area where fast follower strategies often fail. People can be reluctant to shift once they have adopted a set of beliefs and built skills in interactions in a network.
You need to do the work to change the expectations of behaviours in your company. That will not happen overnight.
Your Future Competitor has Started.
Somewhere a present or future competitor has started experimenting with new ways of working. Disruption is as much about new ways of working and new models of management as it is about new customer propositions.
The extensive discussion of the future of work means that different organisations are starting to explore better ways of working. People are experimenting with new modes of organisation, practices of management, the leadership of communities, and different ways to learn, collaborate, innovate or solve problems.
These organisations are exploring more effective cultures and modes of achieving higher performance in their team. They know that it will be a long while before you find out what works for them. When you do even knowing what works for them, you will still have to make sense of the change for yourself. There’s a lot of learning to do.
You can’t catch up without learning what works for you & your network, learning how to implement changes and making the new behaviours expected practice in your organisation.
If you are wondering if it is time to start experimenting with new ways of working, then take a closer look at the practices and experiments of the competitors around you. You can’t start yesterday, but you can run an experiment today.
Any efficiency measure applied relentlessly ultimately becomes inefficient
Business loves too much of a good thing. Relentlessness is a characteristic widely admired in business leaders. Efficiency is a classic area where the impact of a relentless focus on a single practice can be self-defeating. Engineers know this, but managers have not yet learned the lesson.
The first clue to this outcome is the Pareto principle which is widely misunderstood. Pareto highlighted that in many phenomenon a small part of the population has the largest impact i.e. 20% achieves 80% of the impact. Applied to efficiency it highlights that the cost of achieving incremental efficiency using the same measure will increase over time.
Nicholas Taleb has highlighted in Antifragile that slack in a system is often the source of its Antifragility. Slack is what enables systems to effectively respond to shocks. We can’t remove the shocks but we can ensure the system does not collapse when a shock hits because it has no capacity to change and respond.
Business practices are widely copied. People develop expertise in a single practice and become like those described by the phrase “to a man with a hammer every problem looks like a nail”. We over-apply efficiency measures because they worked before or they worked elsewhere. We rarely consider their systemic impact on effectiveness
Consider a few of the efficiency measure applied relentlessly in the corporate world that have created new inefficiencies and damaged effectiveness:
Time Management: ever waited for a meeting to start because someone is so scheduled that they keep everyone else waiting? Our relentless focus on managing the efficiency of time at an individual level creates collective inefficiency.
Outsourcing and Offshoring: the labour arbitrage and other efficiencies of these measures are often overwhelmed when pushed too far by the inefficiency of the system with fixed processes, misaligned performance standards and poor communication and collaboration. Too many organisations have discovered they no longer can respond effectively to customer needs when they overstepped the efficiency measures.
Expense control: Organisations that ruthlessly manage employee ability to spend in a low trust approach often discover employees are far more creative and also spend what they can to retain budgets. New constraints and processes just create new wasteful behaviours because trust has broken down.
Specialisation: Similar to outsourcing and offshoring, removing people from connection to customers and fragmenting processes unnecessarily in the name of efficiency creates its own lack of accountabilities and inefficiencies
Scale: We live in a world where big likely means too big to sense, decide and react.
Performance Management: Employees can calculate expected average returns too. Even with that purpose, autonomy, mastery and relationships are more likely to shape their effort than a relentlessly redesigned reward scheme. The relentless focus on efficiency of performance management schemes and the sense that the rules will be changed to suit the corporate is ultimately ineffective.
Responsive Organisations recognise that efficiency is not the only goal. Efficiency does not deliver on the purpose of the organisation. It merely ensures resources are well applied. Effectiveness delivers the purpose of the organisation and needs to be a greater part of the management toolkit. Efficiency measures need to be tempered to reflect their effectiveness and their impact on the effectiveness on the organisation as a whole.
Organisations need to recognise that the business environment is becoming less predictable. Consequently, successful leadership qualities are changing too.
Want to create engagement? Make engagement in a common purpose the only thing holding your company together. Let people choose to stay. People who choose to engage are always more committed. Importantly, opening that choice will keep you accountable to creating a great team and place to work.
Make People Choose
In traditional organisations, hiring is a marketing function. The difference is well summarised by an old joke that highlights the difference between the treatment of candidates and staff. The objective is to make the job look good so that candidates will join the organisation and submit to its constraints.
Zappos is famous for its offer to pay new hires to leave. The expressed logic is that anyone who will take a small amount of money to leave is not that committed. Psychology tells us the commitment to stay is potentially more valuable to Zappos than losing a few uncommitted people. All the staff that stay chose their jobs over money and psychology tells us that we make decisions to be consistent with our earlier decisions.
Discuss purpose openly in your recruiting. Highlight the difficulties, challenges and work involved. Discuss these things more than status, money or the likelihood of success. People who choose purpose over money or status will be more engaged. Would you rather have someone who joined for the mission or the money?
How do start-ups ever have high engagement when the work is hard, the pay is poor and success unlikely? They make the choice to work in these conditions explicit. People are engaged because they sign up for hardship to be part of the extraordinary. People participate for experiences and learning not available elsewhere.
The approach is not new. This advertisement is a mock-up and the story of Shackleton’s ad may be apocryphal. However, throughout history people have been choosing to commit to purposeful work over money and comfort.
Remove Barriers
Remove the barriers to your talented people leaving the organisation. They will value you more when they can’t see restraints.
Traditional organisations are full of all sorts of explicit to subtle restraints on employees. Non-competes, non-solicitation clauses, no-part time work, requirements other projects or other positions must be approved are just some of the explicit restrictions. The subtler forms are the design of bonus schemes, long term incentives, career paths, etc that reward those who respect the invisible handcuffs. Then there is the policy guidelines: discouragement of networking; media, speaking and communication policies; and guidelines on interactions with competitors or the community – requirements that employees remain isolated, invisible, anonymous and silent. I have even known organisations that celebrate their employees taking car leases or large mortgages because they believe that they will need to stay around for financial reasons.
Encourage people to network. Connect them with each other, your customers, your competitors and anyone who might be of help in the success of your business. Make sure they know everyone that they should know (It will help later in your succession planning). Your business will benefit as they know more. If networking alone will see them leave, then they will leave anyway in a modern networked economy.
Encourage people to share. Help your team to build reputations as leaders in your industry. They will thank you for the profile and the recognition of your contributions. They will bring back clients, amazing connections and insights from their engagements. If sharing their insights leads your team members to leave, then it is a signal that you are missing an opportunity to better use their talents.
Foster the career development of people. Make them the most attractive and best connected talent in the market. As another joke goes:
“If it is dangerous to invest in our people because they might leave, what is the danger if we don’t invest in them and they stay” Make them the heroes and heroines of your organisation. Like Zappos, you will lose a few but your will gain far more from those who remain and understand the value you place on their development and their success. Many more will be attracted to work for you.
Let people go and you will encourage them to return. The ultimate recognition of people’s autonomy is the recognition that they are always free to leave.
Purely Engaged.
I am participating in an experiment of a pure engagement organisation at the moment with the Change Agents Worldwide network. As a network of independent agents, Change Agents Worldwide has no requirements of its members other than they commit to its purpose and they participate occasionally in the community.
Members come and go without restraint, based on their needs and their choices. There is no ability to require people to work or to do any particular thing. Everyone is independent and their choices are respected. People participate in activities because they chose to do so. The challenge for Change Agents Worldwide is to make activities attractive enough that people stay around and the work valuable enough that people collaborate to deliver it.
There is no exclusivity. When we are trying to learn more about the practices that foster the future of work, exclusivity would be counter-productive. All members do the same work under their own names or for the organisations where they work. Members participate and even lead other networks, communities and conversations on similar topics.
Still the members are the only way Change Agents Worldwide does anything. Any client consulting or other opportunities in Change Agents Worldwide are referred to members to realise together.
Because of the freedom, what the members of Change Agents Worldwide do best is that they gather in conversations, swarms and pods to work and learn together. The heart of a pure engagement organisation is collaboration for a purpose. When people choose to work together, they choose to be engaged.
Respect Choices
Most importantly, always respect the choices and the commitment of those who work with you. The sad part of all the subtle restraints in the traditional organisation is that it leads to a mindset that “we can do what we want, they can’t go anywhere”. When you don’t respect and support the commitment of others you will surrender their support. It is little surprise that engagement is so low in organisations with all those restraints and a mechanistic view of employees.
By letting people go when their needs are not being met, you will be more accountable to create a great organisation, great team and great individual contributors. You will be forced to treat each person as an individual, to respect their goals and to focus on realising their potential. The future of work is human.
Employee engagement is a human psychological process. Stop treating it like an industrial machine.
Introduce a target into a modern management workplace and you will introduce a standard set of mechanical efficiency models to achieve that target. Employee engagement is a classic example.
Engagement is human
When we stop and reflect, it is obvious that employee engagement is a human process. Our engagement with our work is the psychological outcome of complex series of elements, including purpose, the work we do, its rewards both monetary and psychological, our relationships with others and much more. Everyone’s engagement outcomes are driven by their unique psychological and social needs. Our engagement is influenced by opportunities offered to us to experience states that people desire across all the domains of their lives like autonomy, purpose and mastery. Engagement is an integral outcome of our connection to others in the workplace and in the surrounding community.
Stop the Engagement Machine
Except that is not how the industrial engagement machine works. Search the internet for ‘engagement drivers’ and you will find lots of great advice on how to treat people as machines for generating engagement as an end in itself. The focus on drivers leads to a focus on top-down engagement plans. These plans measure and relentlessly focus on transactionally moving the drivers. The failure of these plans to shift engagement begins with the disconnect from the daily leadership interactions in the organisation.
Further, the plans fail to take a systemic view of what influences engagement. Clarifying the connection of my work to strategy (a substitute for purpose in many engagement models) will only worsen my engagement if the rest of the system frustrates my efforts to achieve these now more important strategic outcomes. When my leader then dismisses those strategic outcomes to foster their own agenda, all improvement in engagement is lost.
Because we have an industrial mindset we can become more focused on the measures than the actual process. Consider the averaging that is built into most engagement surveys. Does it allow for the fact that individual outcomes matter and that a few highly engaged employees can deliver an enormous impact for the organisation? Averages also foster initiatives tackling the averages, over individual conversations.
Industrialising a psychological process weakens the focus on engagement. I have seen senior managers sit around discussing their engagement scores as if the black box of engagement is a mystery. These leaders expressed aloud the wish that it was a more transparent machine. However, their scores were transparent if they looked away from the report. Their scores were an outcome, not of their engagement improvement plans, but of their daily leadership actions and the culture that they fostered in their teams.
Changing engagement outcomes to improve the responsiveness of a business and to better leverage the talent of its people, requires a focus on those people. We need to leave the engagement machine behind and begin work on the human side of the challenge: an individual employees experience of the purposes, interactions, the connection and the experience of work in the organisation. That will lead us to the changes in the system that will sustain growing engagement.
