Writing

Metrics Change

Posted on by simongterry in Uncategorized

“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.

Start Yesterday

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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.

The Inefficiency of Relentless Efficiency

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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.

Compassion

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People can grow. Practice compassion. Help better their practice.

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In my office I keep a statue of Guanyin, the bodhisattva of compassion. I found the statue in Hong Kong over 20 years ago and loved the serenity & beauty of Guanyin. I also loved the reminder of the value of focusing on compassion for others. Guanyin is connected with the Lotus Sutra which established in the Buddhist scriptures that everyone can improve with the right practice.

[The Lotus Sutra] teaches us that the inner determination of an individual can transform everything; it gives ultimate expression to the infinite potential and dignity inherent in each human life. – Daisaku Ikeda 

The Compassionate Leader

Compassion is greater than empathy for the challenges of others. Compassion is when that emotion leads people to go out of their way to act to help others. Compassion is not a mindset. It is a practice.

Compassion requires a specific focus on each individual. Compassion is about helping each individual to relieve their situation. The ultimate belief of a compassionate approach is that everyone can improve, like the Lotus Sutra.

Traditional organisations with an industrial mindset encourage dispassionate leaders. With a fixed mindset of employee potential and mechanistic view of employee productivity, compassion is discouraged. Leaders need to play to the averages of teams, cut their losses on poor performers and move on. Leaders who show compassion will be seen as overly focused on soft skills or more bluntly as weak leaders.

When the future of work is becoming more human, we can no longer afford the waste in this dispassionate approach. We cannot predict the emergent practices which will define effectiveness in a new connected digital knowledge economy. Innovation, disruption and new value creation rely on leveraging diversity, new ways of working and learning. If so, how can we afford to write people off until we have tried to realise their potential contributions.

Compassion takes Practice

Much of the traditional concern in management around soft skills relates to concerns that these skills are just talk. However compassion demands more than the thoughts and talk of empathy. Compassion demands action.

Leaders can act in measurable ways to help their teams to learn, to improve and to practice new skills. The work of leaders in the future of work is to realise human potential. This will take the hard work of new practice.

Compassion begins with a focus on the individual and an acceptance of their real circumstances. Leaders need to understand an employee’s goals and build their plans around those goals and a frank dialogue about where the employee is today. Compassion does not require you to soften the blow of reality. It requires you to help change it.

Compassionate leaders must work to improve practice. Coaching will play a key role in encouraging employees to seek out, experiment with and learn from new practice. A coaching approach to performance aligned to the employee’s goals and the goals of the organisation can achieve dramatic improvement in individual performance.

Compassionate leaders do not protect their teams from change. They make them better able to benefit from change. These leaders teach new skills and perspectives, show the potential gains in new practices and find alternative ways to contribute for those who are adversely affected by change. Compassionate leaders see change as a way to better realise potential.

The future of work demands compassionate leaders. How is your leadership working to realise the potential of others?

Compassion is a necessity, not a luxury – His Holiness The 14th Dalai Lama

The Growth Mindset of Collaboration

Posted on by simongterry in Collaboration, Future of Work, Learning

Over the last week I have been speaking to a number of organisations across SE Asia around how they can start to realise the value that collaboration can create.   I was outlining my Connect>Share>Solve>Innovate model and helping organisations to plan their collaborative communities using the approach. 

One question kept coming up. The commonest question I was asked was a variant of the following:

How do we encourage our employees to share and try to solve problems when they are afraid to make a mistake?

At the heart of this anxiety is what Carol Dweck of Stanford refers to in her book Mindsets as a fixed mindset. If an employee believes that their ability, status or position is fixed, then they do not want to risk anything that might show themselves as performing below expectations. In a fixed mindset, you avoid testing your inherent capabilities for fear that you will be disappointed. Highly hierarchical organisations encourage a fixed mindset.

Collaboration demands what Carol Dweck calls a growth mindset. To collaborate, we have to believe that through work and effort we can learn and get better together. Mistakes, embarrassment and other challenges are learning opportunities that are overcome with effort.

Shifting to a Growth Mindset

My answer to the question above came down to a simple recommendation:

Make sure in the culture of your organisation there is a personal accountability on employees to improve their work every day.

This recommendation sounds so obvious. Surely we can expect this from any manager.  However, many organisations treat their employees as if their capabilities are unchanging, that improvement is the work of specialists and managers and that daily productivity is all that matters. Mix in hierarchical relationships and you have strongly reinforced a fixed mindset in the culture of the organisation i.e. do your job with minimum effort to the best of your ability only and wait to be changed.

There are many ways a personal accountability for improvement can be created in organisations:

  • customer experience, customer service improvement, etc
  • continuous improvement, productivity, kaizen, six sigma, etc
  • rising financial or performance expectations
  • personal leadership expectations
  • innovation, experimentation, agile, lean startup principles, etc
  • organisational values of improvement, growing impact on purpose, etc
  • talent development and on the job learning

Use one or all of the above. Whatever way it works in your organisations culture and strategy, the requirement is that your organisation expects and rewards people for the daily effort to improve. Over time that helps to create an expectation that every individual will work to make their work better.

The growth mindset in your organisation will drive the value of more mature forms of collaboration. Importantly, it will also drive an uplift in performance overall.

Adaptive practice.

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There is no perfect method.

Searching for a perfect method is not work and is a waste.  

The best way to judge a method is to use it. 

Method should be a path to better personal practice.

Use what helps you work better.  

All methods fail at some point.  

Stop using a method when it no longer works.  

The method no longer works when: 

  • you are spending time on the method that could be spent working
  • you continue to need a consultant, a manual or a system to help you to use the method
  • you do not understand, you feel less capable or you do not know what to do next. 
  • the method does not improve your work.
  • the method stops or delays your work.  

If the method doesn’t work, change it or choose another that works. 

Build your own method through adaptation. 

Relatedness

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In an atomistic, individualistic and competitive business culture we can miss subtleties in many concepts. We focus on the individual and forget the system in which the individual operates.

The idea promoted by Dan Pink that purpose, autonomy and mastery is the key to motivation is a very popular concept where an important subtlety is often lost. People love this concept because it sounds like our ideal heroic business agent – mastering the universe, empowered and enabled by destiny.

This characterisation misses an important point: Purpose, autonomy and mastery shape relationships and our relatedness to others.

Purpose: Purpose is our desired impact on others. We have relationships in the heart of our personal purpose.

Autonomy: Autonomy is not absolute. Autonomy is relative. Our autonomy is a measure of our relationships to others. Autonomy comes from the trust and authority that others grant us based on our behaviours.

Mastery: Mastery is enhanced by collective practice. The measure is not absolute it is an ever shifting relative standard. Read Richard Sennett’s The Craftsman or Togetherness. Read any of Harold Jarche. Mastery is best achieved in apprenticeships, communities, mentoring and the guidance other human relationships.

We live in a world that requires more than freely independent masters of the universe. We need people who manage purpose, autonomy and mastery through and for others. Relatedness is the concept that reminds us that all work is human.

We need to focus on how we best use relationships to reinforce our own motivations, to motivate others and to do our best work.

–

Thanks to Matt Guyan for drawing my attention to the idea of Self determination theory and its use of relatedness.

Friends Don’t Let Friends Get Replaced By Algorithms

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Automation has widespread implications for the future of work. However we get to make choices on how we work. The best way to start is to ensure you practice the skills to work beyond simple routines.

The Office 365 network had a YamJam today on the future of work led by Bob Crozier and Naomi Moneypenny. The discussion was a rich and vibrant conversation about aspects of the future of work. The concluding conversation was about the prospects of the automation of management.

Your Future Robot Overlords

Many managers design their lives for the maximum predictability. The execute simple repeatable routines.  Over the years those routines are refined to maximise efficiency of management outcomes.

Gone to the robots.

I once knew a senior manager who insisted all financial information be presented in one common format. Why? The manager knew how to interpret that format, even though the numbers could never be reconciled to financial systems. Teams of analysts were required to produce the results in the required format and then explain the inevitable discrepancies and queries.

Gone to robots with the analysts too!

I’ve known managers who manage people according to formulas. For example a performance review might sound like an automated script that could be delivered to you by a robot iPad on wheels:

So what is it that makes you think that your performance has been above average? What is it about those outcomes that enables them to be rated above average? I still don’t understand. Perhaps if you were better able to identify how you have contributed above expectations we could record the rating. Let’s agree an average rating for now.

Gone to the robots!

We could go on listing examples of managers executing routines, but selecting similar items and building lists from large sample sizes is a task best left to automation.

Be a Human Manager

The best chance of avoiding the fate of robot replacement is to ensure that you are learning to adapt and change your management practices to make them more effective.  Move out of the simple and routine realms that will be relatively easy to automate.

We can focus on management that improves the effectiveness of people and realises human potential. This is the attraction of the ResponsiveOrg. We can encourage managers and workers to move from the routine to seek step changes in effectiveness. We can harness the potential of the technology to aid managers to handle creativity, complexity and chaotic situations.

We can also recognise that automation is still a developing process. There may yet be needs for humans to help with the processes like trust, relationships, fairness, empathy and engagement that have not yet been easily replicated. One only needs to see Uber’s issues with the fairness of surge pricing to see that algorithms are still learning in this space. On relationships, it seems Uber’s passion for robot cars doesn’t take account of the lack of loyalty in robot car return management algorithms.  

We can’t predict how far automation will reach. We may yet find ourselves as managers of the very human issues that our robots will encounter in purpose, free will and coordination of autonomous agents. We can be sure it will go further than we expect.  However, we have the choice to determine how we work and the practices we learn now to help us to adapt to a changing future. We can choose human effectiveness over eliminating human workers in the name of efficiency. We might yet be surprised by the extent to which the future of work is human.

The alternative is a little bleak.