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How to Defeat “Best of the Best” Teams Consistently

This is part 6 of a series exploring what makes an effective team. Read this if you are interested in great teamwork and high-performance teams in businesses.

Key points:

  1. The higher team diversity, the greater the chance of solving complex problems
  2. Diversity that is most useful for a team comes in two shapes: A. Diversity of Skills and B. Diversity of Personality
  3. Team’s made up of “the best and brightest” are often bested by teams made up less skilled, but more diverse individuals
  4. More homogenous teams are better suited for repetitive tasks
  5. Diversity is an investment: You might get novel solutions, but you have to invest first and provide time for the team to form
  6. Keep a team stable. Period.

The diversity of people and the stability of membership are crucial for a team. Each person brings into the team a set of skills, intrinsic drive, and beliefs. What matters is the way those individual assets can be employed for the team.

Diversity

Let’s talk about diversity first. Diversity breeds innovation. The more diverse people are, the more original and innovative the solutions that the team can come up with. Diversity is a crucial driver of innovation.[1]Get together a crazy bunch of highly skilled people with wildly divergent world-views and backgrounds and the team will likely deliver highly innovative results. The only thing that stands in the way is the integrative ability of the team to get from immense social stress to the right level of social bonds that allows a joint team effort.[2]

We tend to glorify innovation, but innovation is finding small creative solutions in daily work, too. Any effective team is a team in search of big and small solutions, every day.  Diverse teams find it easier to come up with novel solutions.

There are lots of things that make people different, but the two elements with the most impact on team performance are skills and personality. A team needs to have all the required skills available to do a job. The more complex and unpredictable the environment is, the more diverse skills are required. It might turn out that some of those skills are not actually needed. However, complex situations are hard to predict. Who would have thought that calligraphy would be a useful skill for Steve Jobs while designing the User Interface for Apple IOS Operating system? So, it is not only important to have the right kind of skills inside a team, it is beneficial to have more diverse skills available than one would think are needed, too.

Then there is personality, which is much harder to measure. Combining different personality types, like introverted thinkers and extroverted achievers, optimistic and cautious people, inventors and perfectionists is important. A practical way to think about different team roles has been described by Meredith Belbin in 1981, the “Belbin Team Inventory.”[3]While such and other psychological tests are useful for choosing the right people for jobs, not many companies use them, or they fail to apply the insights gained from such an analysis in a carefully crafted decision process.[4]

Philipp Tetlock, a British researcher 2016 writes in his 2016 book “Superforecasting”, that diverse groups of problem solvers consistently outperform individuals as well as groups composed of the best and the brightest. That’s not to say that skill is irrelevant, but a better-rounded set of skills is more useful than more of the same. One rocket scientist in a team of ten production engineers makes a HUGE difference, but ten rocket scientists and no production engineer leaves the team with no idea how to manufacture that good dam rocket.

Philipp Tetlock, a British researcher 2016 writes in his 2016 book “Superforecasting”, that diverse groups of problem solvers consistently outperform individuals as well as groups composed of the best and the brightest. That’s not to say that skill is irrelevant, but a better-rounded set of skills is more useful than more of the same. One rocket scientist in a team of ten production engineers makes a HUGE difference, but ten rocket scientists and no production engineer leaves the team with no idea how to manufacture that good dam rocket.


Still, diversity has its drawbacks. The more diverse a team is, the less cohesive it is. But it is cohesiveness, which makes the team stable. It is tough to align a bunch of very different persons into a productive way of working. The more diverse the team, the more time is needed for people to bond with one another, and the higher the potential for conflict. Diverse teams are great for innovation, but homogenous teams are great for stability.

There is a trade-off between innovation and the stability of a team.

Stability

The integrative ability of a team is limited. It is time-consuming and emotionally stressful to integrate new team members or part with existing ones. A team needs stability. A team that is changing every day or week, where team members keep dropping in or out is no team. There is no time to bond with another, and there can be no shared feeling of commitment, there can be no “us.” Again, this sounds rather obvious. There is a tendency in business to ignore stability. There are always unforeseen things happening, and there are always other priorities emerging, so often there is no other way then exchanging team members, at least for some periods of time. Just a day of the week, maybe, how bad can that be?

Pretty bad. A team which is continually changing might have no chance to perform.  People might never get sufficiently close for effective teamwork. Even worse, if people keep on dropping in and out, people learn that it makes no sense to build up good working relations. People might be gone tomorrow.

A lack of stability hurts the performance of a team tremendously. People need time to get to know each other, and they need to have the time to familiarize themselves with the collective work. Only then the group will build a shared mental model of the way work is done. The academic evidence comes to a universal verdict: The longer a team is stable, with no team members entering or leaving, the better the team’s performance.[5]In a study of research teams, Mr. Hackman has found that exchanging one or two team members in a team of 5 to 7 team members doesn’t hurt performance only if it happens every two to three years. If a team member is to be added, exchanged or dismissed at all this should be done in the early phases of a team’s life cycle, for example with an eye on increasing the skills available to the team.

Yet it is hard to keep a team stable in a dynamic business environment. Certain things can be done to increase the resilience of a team against excessive fluctuation:

•    Get the team composition right from the start. Invest extra time and care to recruit the right people, free them up, and back-fill vacated lines positions. Compromises made early, during the forming of a team, will come back to haunt you manifold later. It is easier to start a team if you allow for some compromises, but it is hard to deliver the results that make the team a resounding success

•    Set the team’s task broadly. A broadly defined task is likely to be more stable if business priorities keep changing. Thereby, while priorities for the team might change in detail over time, the overall direction of the team will still be stable. A team faced with a broadly defined direction in a dynamic business will likely configure itself to use frequent iterations of work, reflection and adjust to evolve their work to the changing priorities. That’s a core idea of the Agile movement.

•    Go for more homogenous teams at the costs of diverse teams. The team will properly not come up with a lot of innovation, but it is inherently more stable. It starts up with much less motivation and coordination debt. Diverse teams find it easier to come up with novel solutions. Homogenous teams find it easier to apply already known solutions. If my house is on fire in Bordesholm, my hometown in the north of Hamburg, I want those local volunteer fire-fighters rushing in, who know themselves since elementary school. I am not interested in novel solutions to fight the fire. I am interested in getting it out, fast and reliably.

Sometimes – and I guess not to infrequently- innovativeness might not be what is called for. It might be more important to get a job done

•    Finally, consider doing less things with teams. Teams start with debt. It takes time to recuperate this debt. If the payoff period is likely to be not long enough to achieve break-even prior this or that change ripping the team apart, it is better to work on things in a manager led, workgroup setting. Only the most important things should be done in a team, as these tend to be more immune from ever-shifting priorities

The Integrative Ability of Organizations

But wait, there is another thing you might want to try. What about if forming and reforming, norming and re-norming teams is a natural part of an organization? What about if the integrative capabilities of groups are so high, that they allow for much more instability without hurting performance too much? Think for example of consulting teams, especially highly specialized ones. Those kinds of teams need to reform and re-norm all of the time, with each new engagement and each new client. While research has shown that even their performance would benefit from more stability of the team itself, good consulting organizations have usually achieved a high integrative capability. In fact, integrative capacity needs to be part of their very business model. However, consulting companies are project-based organizations. So, their model of operating won’t help other types of organizations.

Now imagine an organization that comes with a high degree of integrative capacity, so that effective teams bond fast.  Where people are used to work in effective, high performing team environments. They know what is expected of them and the forming, storming, and norming phases are mastered rapidly. Indeed, some norms for teamwork comes inbuilt in each coworker because it is wired into the DNA of the organization itself. Such organizations are those that rely more on self-managing teams than the traditional hierarchy.

(More on self-managing teams can be found in the previous post https://liberated.company/2018/10/18/forget-about-agile-reduce-overbearance-in-management-first/)

That’s it for today. Let me know what you think!

By the way, I decided to reduce the frequency of posts a bit, as I am busy writing a longer text for the next couple of months.


[1]Pentland, Alexander (2014) ‘Social Physics’

[2]American Psychologist, and disciple of Abraham Maslow, Clayton Alderfer calls this Under- and overboundedness. Alderfer, Clayton (2005) ‘The five laws of group and intergroup dynamics’

[3]Belbin, Meredith (1981) ‚Management Teams‘

[4]Bock, Lazlo (2016) ‘Work Rules!’

[5]Hackman, Richard (2002) ‘Leading Teams’

And: Tetlock, Philip (2016) ‘Superforecasting’; Page, Scott E. (2008) ‘The Difference: How the power of diversity creates better groups…’

1 comment on “Forget about AGILE! Reduce Overbearance in Management first”

Forget about AGILE! Reduce Overbearance in Management first

This is part 5 of a series exploring what makes an effective team. Read this if you are interested in great teamwork and like to explore different types of teams.

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Condition 4: Clear Boundaries

Effective teams are groups of people that act towards a particular direction. Although everyone is different, people inside a team align actions with one another. A crude but essential way of achieving alignment is setting clear boundaries.

By setting boundaries, two things are achieved: First, the freedom to act is clearly defined. The team can do everything that is within the limits of the team.  Second, everything that is set out of bounds is simplifying the mission: It is one less thing to take care of – which is very welcome as long as the boundary does not overly restrict the team’s ability to deliver. Cleary stated limits create certainty for the team. They are giving the team something to work with. They lessen the risk of the team running into major, unyielding, yet unstated boundaries later.

Boundary conditions are everything that is framing the team’s mission: Resources, scope, and deadlines are the three classical boundary conditions given to a team. However, it is although its decision-making power and the very definition who is on the team and who is not, and what is means to be on the team.

Who is on the team?

To merely assign team members is not enough. There are two things to consider. First, what does it mean to be on the team? Which rights and obligations come with team membership? A decision on team membership is a decision to include a person – but it is a decision to exclude a person, too. There should be no in between, and there should be no half-baked assignments, no “extended teams”- just universal clarity. Extended teams are a backdoor to increase team size and dilute responsibility, often for the sake of political convenience. There are always persons outside the team who need to contribute, but usually, that contribution can be limited to consulting with the team, delivering some tasks, contributing to workshops, reviewing and testing.

Second, in high-performance teams being on the team does mean to spend a lot of the time on it, the more, the merrier: Everything being equal, a full-time dedicated team will always outperform the part-time team in efficiency, speed, quality, and any other target dimension. This is not to say that the team needs to be together all the time. It may be necessary to split up the work or explore different paths, while all the time working on the team’s task.

These two demands, clearness who is on the team and who is not, and full-time dedication are so immensely essential and easy to understand yet appear so often utterly unrealistic in most companies. All the right people are already over-assigned.  Restricting the number of assignments is often hard to do, as there is always some constituency to please by demonstrating action. This is all too understandable. Well then, go ahead and over-commit your team to multiple endeavors simultaneously. Just do not expect high performance.

Again, this sounds a bit passive-aggressive. I do not mean to. The fact that people are overcommitted again illustrates the underlying theme in this series of posts: Organizations do not care about individual or team effectiveness too much. They are willing to sacrifice performance for other priorities, like stability and predictability.  Sometimes, they even choose to sacrifice performance to uphold the appearance of busyness. Where results are hard to link to individuals, hierarchies tend to reward people who appear to be busy. It takes much discipline for a company not to overload its co-workers with work. More on that in part III.

What is the authority level of the team?

What is the team allowed to decide on its own? What is the team’s freedom to act? Hackman describes four levels of authority:

  • Level 1: Authority to execute the task
  • Level 2: Authority to monitor and manage work processes and progress
  • Level 3: Authority to design the team and its organizational context
  • Level 3: Authority to set overall directions

Based on these authorization level 4 types of team’s can be identified.

ToT

Type I: The Workgroup that is executing the team task

At the first, fundamental level, the team needs to be authorized to execute the team task. That may sound very basic, but in more political companies even this authorization level is sometimes not given to a team.

One of my very first projects, as a young consultant, was of this kind. Our team was supposed to fix the multi-billion investment management process in the Volkswagen Group across all its brands, VW, Audi, Skoda, Seat. For this, we were supposed to be using a brand new shiny new software package from a south German company called SAP, which offered work-flow functionality to fully digitalize the very communication intensive review and approval process of investment projects. Albeit the very same corporate grandees that initiated this project didn’t want any change in the way work is done to not upset the powerful brands. To implement standard software without changing historically grown processes is a blatant contradiction. Still, our mission was: Implement but do not change anything. While informing a senior partner in our company on our straits, he just smiled thinly and said: “Oh well, they are playing their old game: Go wash me, but do not get me wet.”

Every boundary set on the way the team task is to be executed closes down an avenue to a solution – possibly up to the point that the job is no longer feasible – or becomes bereft of economic sense. An example for this is the demand often faced by teams to keep within just one silo of the organization: You can do everything here, but do not change process X or System Y, that is a given. It is the nature of really important changes to have an impact on multiple organizational silos. Most modifications done to just one part of an organization quite often result in a local optimum – and global dysfunction. They might make sense for a unit, but not for the company a whole.[1]Such boundaries can turn an otherwise pretty sensible team mission to one might make limited or no sense at all.

Type II: The Self-Managing Team that is Monitoring and managing its work process and progress

Once that first, existential hurdle is cleared, and the team is all set to execute the task the next question is: Who is to monitor and manage the work process and progress, i.e., to lead the team? Usually, a manager (or project manager) is assigned to do this, no questions asked. The alternative that a team can monitor and manage its own work is not even considered. Yet this amount of freedom to organize in a way it deems best is precisely what a high-performance team needs. Mr. Hackman and all the researchers specialized in the science of high-performance teams have delivered an abundance of evidence about that.

Managers are not irrelevant in ta Self-Managing team. They still set the overall direction, convene the team and provide the working environment, including setting the boundary conditions. However, they refrain from intervening in the way the team does the work. If managers intervene, for example by coming up with meticulously detailed work break down structures, teams just won’t perform on a high level. Such manager-led teams are workgroups: Collections of individuals to whom work is assigned by a manager. A workgroup might be good enough to do a job, but it is unlikely to achieve high-performance levels. If the work process is managed by a single person, the team cannot build its emergent properties, not integrate in a way to deliver results that are more than the sum of its parts. In such a one-sided power structure, the openness and integration needed for a genuine team effort are unlikely to occur.

Beware about the overbearing manager (especially in projects)

Wait a minute! I just said that the manager led teams are a killer to a team’s performance. I even said that those are workgroups and not teams at all!

This is true. Workgroups are the way most company units or departments are organized. A loosely bound collection of individuals coordinated by a manager. Their performance will never be as high as a team, but their results are predictable and controllable. Work-groups are the norm, and Self-managed teams are exotic. Performance aspirations of line units might not justify a team effort, but within more significant projects, performance aspirations are usually higher. A good case for a high-performing, self-managed team. So how often are project teams self-managed?

Conventional project teams are headed by a project manager. Although Agile Methods like SCRUM discourage the use of project managers, most companies hold on to the notion of project managers. A manager leads a business unit. A project manager leads a project. Someone needs to be in control. It just makes so much sense to them.

Here comes the snag: Effective teams are NEVER manager-led workgroups. They are at least Self-Managing teams, where every team member can engage more wholly. Science has proven that classical, manager-led teams that come with micromanaging, intrusive, administrative procedures, overbearing interventions into the team space do not lead to exceptional performance.

The trouble is that most project managers approach projects with the same mindset as line managers. To be in control is their core concern. The question of control is at the heart of the world’s leading project management methods like PRINCE2 or PMBOK. To reliably come up with projects that deliver on time, in quality and to budget. Control is what is expected by them by the line organization. Get out there, take charge of a project and deliver according to the plan.

The problem with big project management frameworks is not that they do not solicit good advice. The problem is rather that they give too many methods, tools, and advice. If you learn the whole curriculum, you are likely to end up with a zoo of intrusive management interventions that patronize team members and undermine their initiative. There is a commercial incentive to blow up what it takes to manage projects successfully. Project managers tend to think they need to apply all those methods. I am not saying that learning about project management is a bad idea. However, I am saying that a core condition of effective teams, the freedom to determine its path on its own, is often threatened by overbearing project managers. Those types are keen to show what they have learned and are eager to display to the rest of the organization that they are in control.

That sounds like a fundamental attack on the time-treasured ancient art of project management. Old style project management may lead to great charts, great reporting and the illusion of control, but seldom to a great performance.

What’s the alternative to run successful projects? The standard answer nowadays is Agile and Scrum. The trouble is, Agile and Scrum can just be as overbearingly intrusive to teams as classic project management methods can be. The underlying solution lies, according to a host of research on high-performance teams, in managers not intervening too much: Hands-off – Eyes on. The actual project method, waterfall style or SCRUM, is of secondary importance.

Great team performance needs managers who enable teams to do their best. For that, they need to devolve control to the team and give people the freedom to act. According to Hackman and other researchers, a manager should design the team and its organizational context, but not interfere and intrude into the group dynamics of a team. A useful manager is an environment builder and coach, not an overbearing patron or a dictator. Alas, the sheer size of world-leading project manager standards leads people to believe that the more interventions, the merrier. The contrary is true.

Type III: The Self-Designing Team that is designing itself and its environment

Time to go even further. A team can also be trusted with designing itself and its work environment. For example, and contrary to popular belief, it is not a law of nature that managers need to “staff” teams. People can assign themselves to teams and teams can decide on shedding team members themselves. They can produce their own boundary conditions, setting targeted costs, marshaling resources, and to determine the scope of the project without managerial oversight.

Teams can be “self-designing.” In such a context, a manager points a team at a direction and let the team figure out everything on their own.

Wait a minute! That sounds like a free for all. A chaotic commune. Anarchy. Sure, if you make a team Self-Designing, without doing anything about the other 11 conditions for effective teams, you are bound to get into trouble. Those things only work if one takes a holistic approach to work design. What’s more, this holistic approach needs to extend not only to the management of teams but to the management of the company as a whole. Precisely what this blog is about.

Type IV: The Self-Governing teams that set its own directions

The fourth level is to authorize the team to set its overall direction. Such a “Self-governing,” free-ranging team is subject to the same team dynamics described in this part of the post but needs an entirely different organizational context to operate in than a traditional hierarchical organization provides. Such a team is found in Self-managed organizations that replace hierarchies of authorities with hierarchies of purpose – a  phenomenon that is explored in this blog, e.g. Holacracy, Liberation and Management 3.0.

How common are these four types of teams?

What is the empirical frequency of the four different team authorization levels in today’s companies? I have found no studies about this, but here is my hunch:

  • The overwhelming majority of teams are managerial led, co-working groups, let’s say 85% in a line organization and 70% in a project context
  • Self-Managing teams are about 13% in a line organization and 25% in a project context. These are those teams, where a manager is shrewd enough to take on an enabling role to the team and keeps his interventions to a minimum. Such a team might call itself “Self-managed,” but it is.
  • Self-Designing Teams make up the larger share of the remaining 2% in line and 5 % in project contexts. Using such a high authorization level on teams would seriously undermine the appearance of being in control and decisive that a manager needs to uphold, so this is seldom done. It is most common in informal groups, like for example communities of interest.
  • Very few teams are Self-governing. Self-governing teams are only possible in a self-managing organization, and those are very few. They are in the vanguard of today’s organizational thinking.

Managers relinquishing control is a rare phenomenon. Yet it is what is required for great team performance. However, without a manager being in full control, how can a team stay on track? How can low performance be sanctioned? Please hold on to these questions until we make through all 12 conditions of effective teams, as all of those deliver important pieces to the answer.

That’s it for today. In the next post, in two weeks, I will show why diverse teams are sometimes a good idea, but not always.

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Audible…no: I hope you enjoyed this post. Let me know what you think!

Key points

  • There is just one team. Not an extended Team, too.
  • Full time dedication of people to a team is king. Period
  • Authorize the team to organize on its own. There simply is no other way to high performing teams.
  • Good Managers refrain from intervening in the way the team does the work. People call that Self Management.
  • Effective teams are NEVER manager-led workgroups.
  • Agile and Scrum can just be as overbearingly intrusive to teams as classic project management methods can be

Previous posts in this series on effective teams:

  1. Performance in general and what makes individual performance: You call yourself a Great Manager? Let Me Hear Your Theory of Performance!
  2. Why Most Companies Should Not Seek to Work in Teams
  3. The twelve conditions for effective teams, including condition one, a compelling direction

Sources and Footnotes

[1]For more on local optima and how to find out the things that really need to be changed in businesses check out Goldratt, Eliyahu (1994) ‘The Theory of Constraints‘

0 comments on “One Hell of a Task Needs Two Pizzas”

One Hell of a Task Needs Two Pizzas

This is part 4 of a series exploring what makes an effective team. If you want to know how to shape the task given to a team and the optimal size of a team, this post is for you.

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Condition 2: A True Team Task

A true team task is one that cannot be reached by working individually. A task that needs the close cooperation of every person in a team if it is to be successfully mastered. Creating a new system for customer service, expanding to vastly different geographies, coming up with new products and services are all things that surpass the abilities of what workgroups can successfully deliver. It is not that work-groups can’t deliver those things, but results will likely be less than optimal. The typical rate of project failure in today’s businesses is often portrayed to be as high as 70%.

A true team task is often not defined by its nature, but by the performance aspiration.

Let’s take the practical example of implementing a big, enterprise-wide IT application. To implement such a complex system is entirely feasible by working in a workgroup fashion. An experienced project manager is dividing up the work into chunks assigned to team leads, as team leads divide up the work further. While there is some level of cooperation required between team members, this can be organized, for example through the approval of blueprints and in integration tests. Cooperation is limited. Work is parceled out to individuals by managers. Managers rely on project plans that break down all the things to do into detailed tasks and who should do them by when. This proven way of working that will produce results if competent professionals drive it.

So, is implementing a big, enterprise-wide IT application not “a true team task”? There are two answers to it.

  • No, it’s not. It does not really require close cooperation between its members. Instead, such a project is relying on a proven, scripted way of working that allows all individual efforts to be summed up into the final product, the IT system.
  • Yes, it is, if the performance aspiration is high enough. For example, if the ambition is to do that in say two years, a manager led workgroup can do that in the mode described above. However, if the team is supposed to do that within one year, a genuine team effort is what it takes. To cut a year in throughput times needs people to rise above their competent selves and come up with something together that is collectively greater than themselves.  Most of us tend to agree with this instinctively. We know that if we want to achieve something extraordinary, we need some team magic. Moreover, our intuitive understanding is supported by scientific evidence, like the one from Mr. Hackman: A true team can achieve magic.

But unfounded ambitions, won’t do any good, too

The problem is that companies often set extraordinary high-performance targets, because ambitions at the start are high, or they need to overcome the hurdles of budget approval and low bids are what is asked for.  However, usually, the way a project is executed reveals a lack of understanding of the art of building high-performance teams. I have seen this dynamic playing out multiple times in my career in business. While I know that a project could be done in a fraction of time and costs, I did not advise some customer to put in the low numbers. I knew that some clients we not ready for a high-performance approach. Sometimes, most often really, companies as a whole are not prepared to embrace a genuine team approach, as described in the twelve conditions of effective teams. Organizations which embraced my advice may have ended up with long, tedious, but ultimately successful projects. Organizations which rejected that advice and went for ambitious performance targets while relying on traditional workgroup ways of working ended up with significant time and quality problems, budget fiascos, vastly increased employee and management turn-over.

Companies got to lay the groundworks for their ambitions. I have described that point in general terms in a 2016 post Execute crisply with sharp tools.

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Besides the occasional major project, true team tasks are essential for day to day operations of teams too. If the performance aspiration of maintenance, customer service, or sales teams is extraordinarily high, the chances are that a high-performance approach is called for and one should have a look at the 12 conditions. If the sum of all individual contributions is not enough to reach the overall target, a true team approach is called for.

Teams are needed if it gets real complex

All this might be understood as a call for overly ambitious targets. Indeed, there is a blurred line here: It is tough to judge whether the combination of skills and minds in a team will make the goal possible or the target is just wishful thinking. Even for those well-meaning, competent managers who know and do everything in their power to provide the 12 conditions of effective teams, an over aspiring, unrealistic or outright silly target might doom the exercise right from the start. As a rule of thumb, it is useful to understand the level of collaboration between team members that is really needed. The less the need to discuss with one another, the less the need for a high-performance team, the less critical the twelve conditions are.

It takes much collaboration between individuals to deliver good results in complex environments or systems. Complex systems are those where cause and effect can neither be predicted with certainty nor is the relationship between a cause and an effect stable. A machine, for example, is not a complex system. It is just a complicated system, but not a complex one, as its parts are known and behave predictably. All social systems involve humans, and therefore are rather complex than complicated systems, as humans act inconsistently from time to time. Therefore, all teams are complex, and companies tend to be very complex.

Groups of individuals can reliably master less complex tasks without much need of collaboration between them. Take for example service teams in call centers. The core of the work is done by individual agents on the phone, during the conversation on the phone. Co-workers can be useful to reflect with before and after the customer call, but all work is centered on the individual without the need for much collaboration.

The thing is: The more complex the task, the more it becomes a “true team task,” the more collaboration is needed and, in turn, the more critical it is to consider the 12 conditions in the work design of a team.

Most companies have configured themselves to be less complex

Indeed, in most organizations, most performance contexts may not lend themselves well for a true team task. Only if the performance ambition is high enough and the nature of the task requires intense communication between team members, a team effort is called for. Many businesses use the term “team” in an inflationary member and think of all groups of people as teams. So, they invest in nice team building events sponsored by HR budgets and helped by a host of business trainers. This is as inefficient as it can get: To spend money or time on team building while the need for collaboration is really not that important at all is to create waste.  It usually suffices to give such a work-group a good understanding of expected behaviors, control the application of those behaviors and let them do their work.

The point is: On a case by case basis, the work group is a better choice to organize work inside traditional organizations. But on the whole, if the whole organizational design of the company would not have been set-up to contain complexity and promote predictability, the team would be better choice. Most companies have configured themselves to be less complex, to suppress the complexity of the market. Designs that allow the complexity of the market inside the company usually involve a bit more structures that promote self-management within a company. But I am getting ahead of myself here.

Condition 3: Team Size 5

Defining a true team task is tricky. It’s time for some refreshing simplicity: The optimal team size is five people. Do not build any teams much bigger or smaller than that. The standard variation around the optimal team size of five is two. So, any team size of 5 +/- 2 is the optimal team size.  Beyond that size, split teams. Beneath that size, is just the pair. For two people working together, the laws of teams are not as relevant as the laws of psychology and good communication.

Even the science on team size is rather simple. With every member added to the group the number of relations which each individual needs to build and maintain increases linearly. In a team of three, a team member needs to develop and maintain two links to the other team members, in a team of four three links, in a team of 5 four links.

However, in order to effectively operate within a social group, it is not sufficient to build and maintain links with all other team members, it is vital to theorize about the ties that others have with one another, too. If you know that Joe and Sue do not get along well in a particular aspect, it may be better to circumvent that problem before it arises. Effective social groups do not only care for the relationships that they have individually, and they care about the links that others have between them. They care for the collective. They care for the team.

The trouble is that the total number of links in a team does not increase linearly. It grows exponentially. The total number of links between team members = N * (N-1)/2, whereby N again stands for the number of people in a team.:

  • A team of three everyone has a total of three links.
  • A team of four has six links.
  • A team of five has ten links, and in a team of seven has 21 links.

This number rises exponentially. In a team of 20 persons, every team member would have to build and maintain 190 connections. Why the jump from seven to eight team members might not seem like a big deal, the total number of links in the collective increases from twenty-one to twenty-eight. While the number of links per person is just increasing by one (from 7 to 8)- that is 14% –  the number of total links in the system is increasing by seven (from 21 to 28), 33%. Increase the team size by three from seven to ten, and this ratio goes up from a 42% increase in the number of links per person to 214% for the total number of links in the group.

This a mathematical way of saying: Size matters. The negative performance impacts of increasing group size are hard-wired into teams. With rising team size people can relate to one another less and less. To invest more in coordinating the team helps a bit but can never offset the negative impact on performance fully. Jeff Bezos is known to have coined the phrase “two-pizza teams” as a rule of thumb for determining team size at Amazon: A team that cannot be fed by two large pizza’s needs to be split.

  • If intense collaboration is what is needed, low team size is the way to go.
  • If intense collaboration is not required, don’t go for the team approach at all and organize the group as a work team instead.

It might not always be easy to cut down on team size, as this or that skill or organization needs to be represented. In this case, consider two things: Either split the team in two and manage those separately or come up with a better definition of the team boundaries, especially who is on the team and who is not.

That’s it for today. In the next post, in two weeks, I will get to discuss a very exciting subject: Do teams need a manager?

___

Audible…no: I hope you enjoyed this post. Let me know what you think!

Key points

  • Most tasks can be made a great one for a team if you just level up the performance aspiration
  • HOWEVER, do not level up the ambition, without having laid some solid groundwork inside the organization for those conditions that make teams great
  • Most companies have configured themselves to be less complex, to suppress the complexity of the market. Therefore the workgroup is often a better choice
  • Team Size 5. Team Size 5. Team Size 5. GOT  IT?
  • Two Pizzas – one Team

Previous posts in this series on effective teams:

  1. Performance in general and what makes individual performance: You call yourself a Great Manager? Let Me Hear Your Theory of Performance!
  2. Why Most Companies Should Not Seek to Work in Teams
  3. The twelve conditions for effective teams, including condition one, a compelling direction
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The 12 Conditions for Effective Teams

Part 3 of a series that explores the effectiveness of individuals, teams, and organizations

The factors that drive team performance are very well researched. This post is based on Richard J. Hackman’s research on team performance.   Mr. Hackman has been a Harvard professor who specialized in organizational psychology.[1]He is recognized today as the most authoritative voice on the topic of team performance. He devoted his academic life to the research of teams. In his 2002 book “Leading Teams” he came up with a list of five conditions that foster team performance. I took the liberty of re-ordering and often re-naming these factors for better understandability.[2]

This re-ordered model of team performance is based on a total of twelve conditions. Nine conditions internal to a team, and three conditions external to it. This effectiveness model aims to be collectively exhaustive and mutually exclusive.

Screenshot 2018-09-06 12.59.18.png

All the twelve factors listed do matter, for any team. There is no weighting given with this model. Weightings depend on the specific performance context the team is in at a certain point in time.

The twelve factors are no menu card. You can’t choose to run a team by, say “a compelling direction “and “small size” only while neglecting the other factors and still expect high performance. In general, all 12 conditions must be there for a team to achieve great things. They are reinforcing one another.

Meaning and Spirit – the Internal Conditions of Effective Teams

The internal conditions are those that held within the team. Some of those might be set externally at the start of the team effort, but once the team effort starts they are the essence of what this team is all about. They become internalized into the fabric of the team.

There are two categories of internal conditions: Meaning and Spirit. The five conditions subsumed under Meaning describe what the team is all about:  The direction of the teams work, the tasks that they are doing, team size, the scope of the effort and its composition and stability. Meaningful work engages people. Meaning does describe why something is to done and what people do. It’s a reason to climb up to a summit and a clear view of the mountain. To be clear on the meaning to a team is a good start to pay off the motivational debt of teams.

The Spirit of a team is describing how the team approaches their work: The impact people they feel their work has, their level of aspiration to do great things, the way they think about their ability to speak up, and the level of transparency and trust.

Let’s start with exploring the five factors that make up teams Meaning first.

Condition 1: A Compelling Direction

A compelling direction has several functions in a team setting:

  • Harnessing the team to the targets of the organization
  • A source of motivation
  • Provide direction for decisions to be made
  • Align the actions of all team members towards the common goal

Setting a compelling direction is more than goal setting. To set goals is a classic, often useful management practice. Goal setting is the art of laying out clear goals, for example by using the SMART criteria that decrees that targets should be Specific, Measurable, Attainable, Relevant and Time-based. Setting a goal implies setting an end-point, a definite location that to achieve.

However, the higher the performance aspiration of a team, the less traditional goal setting will suffice. First, in complex environments where solutions cannot be known at the start of the effort, being too SMART in goal setting, will be limiting for the team. If the problem is complex, it is not wise to be too specific. Goals need to be described on a high level and vague level. Being too specific will determine outcomes in ways that are hard to anticipate before the team gets its hands dirty on the complex matter itself. Second, for a team, it is often crucial to figure things out for themselves. It is tough for any team member to latch her intrinsic drive on to the team’s mission if too much is already defined. By supplying overly detailed goal criteria, the freedom of the team to do what it deems to be best is limited.

It is a better idea to get a team to work itself into the subject matter – to advance in a given general direction. It will find out new things and will over time and decide then what to go for and where to end up. For teams, a direction works better than specific goals.

Let me give you a prime example of how to set directions, but not goals.

Mission Type Tactics

Providing a direction is nothing else than giving a mission. This style of command is known as “Mission Type Command” in military command theory. Its origin is the German “Auftragstaktik” is attributed to the Chief of Staff of the Prussian Army Erich von Moltke. Auftragstaktik and has been a core element of German military thinking, and modern military tactics, ever since.[3]

In mission-type tactics, a subordinate commander is assigned a mission, the resources available to attain it, and a time frame. The subordinate leader then implements the order independently. The subordinate leader is given, to a large extent, the planning initiative and freedom in the execution. Thus, a high degree of flexibility at the operational and tactical levels of command is achieved. Mission-type orders free the more senior leadership from tactical details.[4]

The opposite of Mission type tactic is the Command tactic. People using command tactics give exact orders, SMART orders. Maybe too SMART.  To manage teams effectively, managers need to learn a new trick and refrain from providing precise orders. Instead, they need to be vaguer. They need to point in a direction. Now, this might seem like an ideal excuse to give sloppy orders: “I do not need to be exact in what I am ordering you – go find it out yourself.” Sloppy orders would leave the team wondering what to do, wasting time and possibly never get anywhere.

To specify missions and not end up issuing sloppy orders is hard. Giving an excellent mission to the team requires much thoughtfulness on the part of the one defining the mission. Here is some guidance:

  • Describe the mission as an intent, not end-point[5]
  • Give boundary conditions, that act as guard rails
  • Refrain from determining the ways of getting towards the intent

Mastering the art of mission command might be one of the most crucial things that distinguish an ordinary boss from a great leader, both of military as of business organizations. It takes much humility to accept a variation in methods and a variation in outcomes.[6]  It takes the willingness to accept the risk that one’s intent is misinterpreted. It takes willpower to refrain from being too explicit and not declare once own perception to be the truth. There is a lot of doubt and uncertainty involved in trusting other people to do your bidding to their best of abilities.

These are all reasons why mission-type tactics are seldom used in traditional businesses. Mission type tactics are best used in environments of uncertainty, complex situations where swift action based on local knowledge on the spot of the action is crucial. Alas, traditional businesses and management practices are aiming at eliminating uncertainty, to fence it in, to produce predictable, constant outputs. Things that worked fine in the industrial revolution, but that are deeply problematic for many challenges posed by the digital age.

There is another snatch: Mission-type tactics alone do not work well if used in a traditional business environment. To understand a direction, the intent and not the end-point, in spirit and not only to the letter, the team needs to have a splendid view of the organizations need, with all its various constituents who are invested in or impacted by the team’s efforts. Even more than a genuine understanding of the situation, the team needs to have a view on the dynamics of the situation: Is the stated intent really what a constituent wants? The more complex and dynamic the situation is, the more the team needs to develop, maintain and test a hypothesis how the intent of the organization might be changing over the course of the team effort. This level of visibility needs much more close bonds between people and a level of transparency that is hard to find in most companies. It requires a supportive organizational environment geared towards shaping intense personal relationships and a culture of organizational transparency.

Who set’s the Teams Direction?

The first thing is to be clear about is who is setting the overall direction of the team. This is usually not the teams’ job, but the person or group that want something to be done. The need to get something done is, of course, the very reason why a team exists. A team is a tool at the hands of someone or a group to get something done.

There is just one exception to that rule: In a self-governing team, a form of organization used in highly innovative or egalitarian organizations, which are not bound to conventional hierarchy, a team may choose its own direction. An example is a community of interest, which can work even in hierarchical business, where co-workers are forming teams on their own initiative and waiting for followers to “vote with their feet” and self-assigning them to a cause. While this form of a team is still somewhat exotic in a business environment, its results are often attractive. Organizations employing those teams at scale are Google, Netflix, IDEO, Haier, Procter & Gamble, Unilever, Microsoft, and many others. For the overwhelming majority of businesses, most goals need to be set by the hierarchy in a way to serve its needs.

A Mission does not need to be Inspiring

While it is difficult to set a good mission, it is still not enough. The mission needs to be compelling, too. Nowadays we tend to understand the word “compelling” synonymous with adjectives like inspiring, purposeful, or motivating. However, compelling can as well be connected with attributes like coercive, forceful, or void of alternatives. A compelling direction may not at all be a positive one. Take for example the need to close some operations and lay-off people. This can be a compelling target, too, because management has decreed this, and might frame it as a cut necessary for the survival of the whole organization. Most of the time, we tend to think of teams and business of being a growth story, forward-thinking, providing opportunities and winning. This is quite silly, as leading organizations and teams means not only to be starting things but to be ending things, too. An inspiring mission is excellent and much preferable – but a sincere one will do just fine.

But if the direction of a team is not inspiring, how can a team member ever give her or his best? She might be compelled or even coerced to do things, but surely her intrinsic motivation will take a hit and limit her performance, right? Perfectly right, an uninspiring (but still compelling) direction results in intrinsic motivation taking a hit at the start of the project. However, it is just the start of the project. This debt can be recouped. People are terrific to find their sense of purpose once the team progresses. One of the most potent biases there is, the confirmation bias, lets people reinterpret their world in a way to see their actions and the actions of others in a more positive light over time. Individual autonomy enables people to find their purpose even within a compelling but uninspiring setting. This personal purpose might not be felt at the start, but a good team context might enable every team member to find her or his purpose while working towards the goal of the project.

The quest to come up with an inspiring, instead of just a compelling direction is morally laudable, and it is beneficial for team performance. However, it is not needed to achieve high performance in teams. Think of it this way: What is an inspiring target for one person, might have little attraction for another. What can be inspiring on a high level, might be lost entirely in the daily struggle to get things done.  Motivation is a very individual thing. To come up with an inspiring direction that motivates everyone, independently of personal idiosyncrasies, is hard. Not every company is there to save the world. There is a job to be done, and it needs to be done for a compelling reason. That’s good enough. Inspiration is laudable, but it also is optional, often unrealistic and therefore usually ends up existing in shallow corporate slogans only.

To seek congruence between the direction of a team and the motivation of individuals often means to fight a losing battle. Instead, come up with a sincere direction, and let the group dynamics their individual motivational dispositions to the overall direction over time, while working towards the target. A sincere direction is often more practical and meaningful than sending people on an inspired mission invented by someone else or during a group “visioning workshop.”

 Warning: Directions release Energies

The more compelling the direction of the team is for its members the more energy will be released. Surely, releasing energy is a good thing to get things done, but releasing energy is dangerous. Usually, if given a choice between an under-energized and an over-energized team, most managers and organizations would choose an over-energized “squad”. The over-energized team might break things, in its push to get things done, but it gets things moving. But there are problems.

If the organization is not mobilized to a sufficient level for the change that the team is supposed to bring into life and the team is not able to pace its enthusiasm to what the organization can absorb, clashes will occur. These clashes might destroy the team’s energy level and burn significant relational capital that the team needs to succeed. A team’s effort is a lot about pacing. A team leads a change effort inside a company. Therefore, it needs to be visible to the other co-workers and not disappear out of sight of the rest organization. Enthusiasm is a virtue but might lead to frustration. A measured pace is often preferable over short-term euphoria. After all, most really significant changes are rather marathons than sprints.

Next post will take a look at Condition II:  “A True Team Task”. I hope you enjoyed this post. Let me know what you think!

Key points

  • Effective teams require 12 Conditions: 9 internal and three external to a team
  • Two types of internal Conditions can be identified:   Meaning & Spirit
  • The first condition is: A Compelling Direction
    • Mastering the art of mission command might be one of the most crucial things that distinguish an ordinary boss from a great leader
    • Mission-type tactics alone do not work well if used in a traditional business environment
    • To seek congruence between the direction of a team and the motivation of individuals often means to fight a losing battle
    • A team’s effort is a lot about pacing

Sources and Footnotes

[1]Hackman, Richard (2002) ‘Leading teams’

[2]According to Prof. Hackman there are 5 factors that driving team performance: 1. A Real Team 2. A Compelling Direction 3. An Enabling structure 4. A Supportive Context and 5. Coaching. All these factors and not more are represented in the model I give here. Just that I extended those factors to 12, as I think there is too much of importance hidden underneath some factors, especially in factor 3 “enabling structure”.

[3]Mission type tactics has been at the heart of German military doctrine ever since the three successful campaigns for German unification against Denmark, Austria and France at the end of the 19thCentury. A large part of the successes of the World War I’s “Sturmtruppen” (Small team tactics) or World War II’s “Blitzkrieg”, can be attributed to the vast discretion given to commanders at the front. For more an Moltkes command style see Barry, Quintin (2015) ‘Moltke and his Generals – a Study in Leadership’.

[4]Paraphrased from https://en.wikipedia.org/wiki/Mission-type_tactics

[5]In western military this is known as “Commanders Intent”. It is the second item on any mission briefing, just behind a description of the situation.

[6]Does anyone remember the “Fuzzy” Movement in the 2000’s? A hype term borrowed from electronics (“fuzzy logic”) that has been used in business to praise the virtues of vagueness and heuristics.

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Why Most Companies Should Not Seek to Work in Teams

There are lots of reasons to hate teams. Teamwork diminishes authority, often involves endless and ultimately indecisive discussions, foul compromises and can be generally unrewarding.

There are lots of reasons to love teams. Working closely with another, with a near intuitive understanding, learning all the time and achieving more than one ever would have thought possible.

Today the hymn of the great team performance is sung all over the realm of business. Agile, Lean and nearly all progressive organizations rely on the team as the primary unit of work. In business, many people haven’t had that many great team experiences. Why is that?

I think there are two reasons. First, a group of people is not necessarily a team. Teams are a bunch of persons working together closely to achieve a goal that would have been out of reach for anyone acting individually. The dividing line between a group and a team is the amount of interrelatedness of team members. It alienates people if a manager say’s “you are a team,” while you know that one of the last things you want is to be associated with those slackers, psychopath, suckers, pretenders.[1]In day to day conversations, little difference is being made between a team and a group. If you and your co-workers are just a bunch of ladies and guys toiling on their daily tasks without too much need to communicate at all, the chances are that you are in a workgroup but not a team. In this setting, managers tend to appeal to the spirit of the team if she has no clue whom to make responsible for something.

Second, teams can make you feel powerless. In the quest to achieve something, it’s just much more complicated if you need to get along with other people instead of being able to deliver this thing on your own.

Now, in this post, I will not research what makes a great team experience.  I am a North German. As such, I am culturally primed to be too serious to write about such trivial matters as pleasurable experiences.  I will instead spell out what makes a team perform at a high level. I walk you through the conditions, and I think the chances are, that you will feel that a team where these are given, would be a good one to work in.

However, before that, I would like to get the basics of the economics of the team straight, because teams are not universally good. Sometimes, the better choice is to do work in a workgroup, than in a more tightly interconnected team.

The Benefits and Costs of Teams

If you want something done, you got to do it yourself. That might be the credo of an incompetent manager – but it is often true, too. A look at the empirical evidence of individual vs. team performance confirms this: Teams are often worse performers than individuals.

Here is an example. A study at Yale University looked at the time “A” grade students invested in their studies.[2]All the students were top, “A” grade, performers, but some managed to get to an “A” Grade by investing less time. The most efficient students spent just 10% of the time that the worst performing student did. A 1:10 performance ratio between lowest and highest performance student.

Now have a look at the performance of teams. In studies that looked at thousands of projects, the ratio of performance between the best and the worst performing teams was as high as 200: 1.[3]Imagine that: There are project teams so bad, that they accomplish what another team does in a week in 200 weeks! Apparently, there are factors at work that complicates teamwork a lot, compared to work that is done individually. Lousy team experiences can get people to back off from teams for good – and it is hard to blame them. How frustrating it must be to see all this waste if one works in a tedious, four yearlong project: 199 weeks sacrificed to entropy for could have been achieved in just one week.

Then again, the top teams are outperforming other teams by a factor of 200. What a bliss it must be to work in such a team! Effective teams manage to outperform less-effective teams by 1:200 – effective individuals manage to outperform others by 1:10. Apparently, there are many things to get right – and many things to get wrong – in teams. A team is a sensitive thing indeed. The following graphic illustrates the difference in performance spread.[4]

ivt

If the conditions for successful teamwork are given, a team is likely to outperform a group of individual actors.[5]Not by small increments, but by order of magnitude. Furthermore, the chances are that in complex and innovative situations, only a team-based organization will be able to deliver the intended outcome at all. The unique way a team is able to utilize the skills and minds of people, allowing each to exploit personal strength and grow in the process, can bring many superior results.

Still, a poorly organized team might be a nightmare. The point is: Companies that are not able to provide a suitable environment conducive to teams should stay away from the team. Instead, they should organize work groups, where managers define, assign and follow-up work tasks. That can be a much safer and efficient alternative.

Team Debt

Let’s take a look at the reasons for a team’s underperformance first. A way to understand the looming underperformance of teams is to think of a team’s potential performance in an equation:

Team Performance = Potential Performance – Coordination Loss – Motivation Loss[6]

The potential performance of a team is its theoretical peak performance. It might vary from team to team, from mission to mission, from the composition of the team with various team members, but there is always a theoretical maximum performance level. We might not know it, but it is there and likely to be reached if the 12 conditions are fully satisfied.

However, potential performance doesn’t translate into real team performance. Every team is automatically incurring two hits to its effectiveness. These hits are incurred right at the start of the project, and they are universal and unavoidable.

First, there is the cost of coordination that is needed to align people again and again on a target and ensure that work is done in a coordinated manner. Team meetings, Team processes, Reports – you know the drill. This alignment is meta-work, it takes time, that is not spent on working directly on the task at hand.

Second, a team task is very often less critical to a person than a task directly assigned to a person individually. A team task is somewhat out of the control of a person. Others need to collaborate. This is somewhat frustrating, as it prevents motivated persons from charging headlong into solving the task. On the other side of the motivational scale, a team opens up the opportunity to relax and take it easy. If the task is out of reach of what I can accomplish by myself, I might as well wait for the others to do something. This phenomenon is called “free-riding” in economics and “social loafing” in social psychology.

So, there is a universal and unavoidable penalty for each team effort. This penalty is in effect a debt that each team starts with. The good news is that this team debt can be repaid. Over the lifecycle of the team, the team may learn how to coordinate effectively, even intuitively.

Allow me a personal story about coordination debt, here. As I was 18 years old, I once had the opportunity to play a game of soccer against a German premier league team.[7]Being young and full of self-confidence, I respected this team much but still thought that in a one on one situation I can hold my own. It happened to be that I was playing against the at this time striker of the Polish National Team, Jan Furtok. I was right: I never lost a one on one situation against Jan Furtok in 90 Minutes – because there were none. He just didn’t need to go into these situations, as he knew exactly where to be at what point in time. Before I could do anything, he already passed the ball and moved on.  He and his co-players had an instinct understanding where the other would be and where he would play the ball. Their coordination was so brilliant; they did not have to use much of their abundant personal skill. Not against us village boys.  My team had so much of a coordination debt that all skill didn’t even play a role.

To repay coordination debt takes practice and reflection. The same is true for motivational debt. It can be repaid over time by opening up the new sources of motivation that the team offers: Relatedness to other persons. To not let down the team, to be loyal to it, to care for one another becomes a natural motivator the more people can bond with one another over time. With increased bonds, comes visibility and social control, which in makes coordinating the team easier: Coordination debt is repaid until coordination between people happens seemingly intuitively.

Coordination and motivation debt can be recouped over time. As the team gains in maturity, coordination efforts decrease, and the motivation dynamics of groups take over. This ripening of the team is accelerated by orchestrating the process of team building. Every team needs to go through a sequence of 4 phases that Bruce Tuckman, a scholar of organizational psychology has described as storming, forming, norming, and performing.[8]The better this process is managed, the sooner the team debt can be repaid. The team debt acts like a negative up-front investment that can be recouped in a classical “hockey stick” curve like manner.[9]

tuck

 

Does Team performance matter?

Excellent performance is not always what a company needs. What is needed in most situations is a team performance that is good enough to reach a certain level and do so consistently. A job well done by a team might not require a high level of performance. Often teams can get away with less.

This may sound unconventional and dispiriting, but this mode of operation is actually the norm. Most units or departments exist to do a particular, usually well-defined job, consistently every day. More is not required. Beside human laziness and ineptitude, there is an excellent rationale for this lack of performance aspiration for a team. First, as shown above, high-performance teams start with significant debt. The organization might be inept to provide an environment where a team can ever exceed the performance level that a much less risky workgroup can deliver. Second,  teams are pretty sensitive things. They might produce great outcomes but tend to do so inconsistently. High-performance teams are much harder to manage than teams or workgroups that aim at lower, but still useful enough levels of performance. Going for high performance is risky – good enough performance can be bought for less.

 

The Reasons why Teams may outperform Work-groups

However, what are the reasons why a team can perform better than a working group? After all, individuals are what teams are made off – why is a team allowing individuals to surpass themselves if only they act in unison? Here are the main reasons:

  • Growth and Learning are enhanced in teams. We learn by social interchange and feedback. The much tighter social collective context of a team enhances growth and learning for everyone in it, compared to the looser coupled workgroup. This is not to say that individuals do not learn in work-groups. In good teams, they just have more opportunities, nudges, motivation and need to learn – and grow as a person.
  • Social bonds increase motivation. People are social animals. Tight social bonds are one of the primary things that motivate us. Some studies show that the quality of relationships to others is the deciding factor regarding one’s quality of life and happiness. In the world longest running research on happiness, which has been running since 1938 and is still ongoing, the most significant decisive influence factor for the overwhelming majority of persons is the quality of relationships – by far.[10]  The fact is, humans are hard-wired to care for others.
  • Coordination is achieved much more smoothly the closer people bond with one another. If people look out for one another, with the team task in mind, the mind and senses of everyone in the collective, the team, are coordinating their work implicitly. Until there is no need for a single mastermind, the manager of a group, to be the one sole, principal caretaker for the whole group. Coordination in a team happens more and more in a distributed and implicit manner, instead of being centralized and outsourced to a manager.
  • The human mind is very susceptible to biases. The team can be a corrective. If the team engages in active discussion, allows for people to speak their mind, integrating a multidate of perspectives, the tricks our mind plays on us can be mitigated. By discussing with others and receiving feedback, we can be pushed out of intuitive thinking – i.e., rushing to conclusions- into, rational thought.[11] This mitigation is empirically much more effective by interpersonal interchange, then by staying within the limitations of one’s mind.

The importance of the last point is hard to overstate. Teams improve even a sociopath nerd that possess a cold, analytical outlook of the world and does not have too much interest in others. His cognitive biases, his memory biases, and latent social biases are all decreased by social interchange. This way, a team helps to surpass our biological, neuronal limitations.

That’s right: The team helps to overcome our evolutional, cognitive impediments. The better the team, the more a team is set-up to un-bias the individual. The history of group dynamics (or group processes)[2] has a consistent, underlying premise: ‘the whole is greater than the sum of its parts.’ This is a large part of what collective intelligence is all about.

However, still, the fact of the matter is: Each team starts with a sizeable debt. Unchecked, this debt will accumulate, and a team’s performance might stay below the level of a workgroup. In this case, the team as a method of organizing is not optimal.

However, if we can devise a way to rapidly pay off team debt, reliably again and again for each new or changed team, then the team might become a very superior tool to achieve organizational performance. Indeed, the team as a way organizing can get much more attractive than the department, i.e., a manager led workgroup, as the principal basic unit by which work is done. Such an organization would be one of a lot of networked teams with few central controls. However, before we get there (in Part II), let’s check out the 12 conditions of team performance in detail.

Oh, and one more thing: Individual performance matters.

Before we start looking at the 12 conditions of team performance, here is a reminder. The six internal conditions for individual effectiveness remain valid (for those check out You call yourself a Great Manager? Let Me Hear Your Theory of Performance!). To have the right skills, the right cognitive abilities, the urge to archive mastery, the autonomy to act, the deeply felt meaningful purpose and to be genuinely accountable for results still matter very much for effectiveness. The strength, weaknesses, needs, and idiosyncrasies of people don’t go away once they enter a team.

Effective teams build upon the conditions six for effective individuals. The 12 conditions of effective teams are all but tuned to provide a social environment for individual performance to prosper.

Yes, by leaving one’s confines of individuality and exposing oneself to others motivation takes a hit and coordination is tedious. Until one realizes that mastery is enhanced by collaborating, while one’s needed level of autonomy is not infringed upon and that the purpose of serving the group is one that can latch on to with one’s personal purpose.

Key Points

  • Team debt is universal and unavoidable
  • Companies that are not able to provide a suitable environment conducive to teams should stay away from organizing work in teams – they should stick to the workgroup instead

  • If a way can be found to rapidly and reliably pay off team debt, the team can be the nucleus of all work design, replacing the traditional department/workgroup

Next post will be about the first half of the 12 conditions for team effectiveness. I hope you enjoyed this post. Let me know what you think!

Sources & Footnotes

[1]The academic term is “underbounded” team. See Alderfer, Clayton (2005) “The Five Laws of Group and Intergroup Dynamics”.

[2]Sutherland, Jeff (2015) “Scrum”, p.42 based on a study by Joel Spoelsky on computer programmeUniversityle university class, see also https://www.joelonsoftware.com/2005/07/25/hitting-the-high-notes/

[3]IBM studies on project performance, cited by Sutherland, Jeff (2015) “Scrum” p.43

[4]Values are illustrative only, they can’t be generalized. Values are based on the exemplary studies cited by Sutherland, Jeff in “Scrum”, see above.

[5]Hackman, Richard (2002) “Leading Teams”

[6]Hackman, ibid. Hackman based this formula on psychologist Ivan Steiner, who described the term “process loss “ in his work.

[7]Hamburger Sport Verein (HSV), a member the German Bundesliga.

[8]Known as “Tuckman’s stages of group development”. See Tuckman, Bruce W. (1965) ‘Developmental sequence in small groups’, Psychological Bulletin, 63, 384-399. Tuckman later added a 5th phase, “Adjourning” to highlight the importance of the way the teams work is ending.

[9]Katzenbach, ‘The Wisdom of Teams’, 2002

[10]The Harvard Grant Glueck Study, see http://www.adultdevelopmentstudy.org

[11]Described by Daniel Kahnemann and Adam Tversky as System 1 and System 2, in: Kahneman, Daniel (2011) ‘Thinking Fast and Slow’.

3 comments on “You call yourself a Great Manager? Let Me Hear Your Theory of Performance!”

You call yourself a Great Manager? Let Me Hear Your Theory of Performance!

“No theory of Management is worth anything if it has no underlying theory of performance”. I am not sure where I read this sentence, but it stuck with me ever since. The performance question is the “holy grail” of any organizational theory. The very reason why companies exist is that they are there to perform something. The very function of the market is to root out low performing companies.

Still, most management advice is of the self-help nature: There is much advice given how to do this or that, without ever being clear on why this or that management action should work. This article is the first one in a series that drills down on the conditions of performance, the underlying theory of human performance as individuals, of groups and of companies.

After all, performance is the crowning discipline of anyone who is managing. A manager/ leader’s job is to get people to do things.

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But there are ways of getting people to do things which will cause people to achieve much and ways that won’t achieve much. So how can management practices be designed in such a way to maximize performance? To answer this question you got to look at the conditions that drive individual effectiveness.

Individual Effectiveness

Why does individual performance occur?

Here is the synopsis of what I learned from my research over the years.

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Internal Conditions

Internal conditions are, first of all, the capabilities that people bring into a job:

  • A set of skills at various levels
  • Cognitive abilities, such as  Intelligence (IQ), Emotional Intelligence (EQ) and specific talents

No big surprises here: You hire for skill. And slightly more advanced, you rely on some personality tests in order to select by cognitive ability (for more on this checkout Hiring like a Pro: Lessons from Google).

But capabilities are not enough. It takes the willingness to use those capabilities, the willingness to fully engage. Engagement can be triggered best by addressing the needs of a person’s intrinsic motivational structure. Of all the literature on intrinsic motivation, I have found the summary that author Daniel Pink made most useful:

  • The urge for mastery, to perfect oneself
  • The autonomy to act
  • To follow one’s own purpose

Of course, no one has the same urge for mastery, the same need for autonomy or the same clearness of purpose. Some people may like to hang loose, spend their time on youtube or engage in social media all day. These people are unlikely to be highly effective. Some may not have found their purpose, their need for mastery and autonomy just yet.

Internal conditions are more or less given to a person, at least at a certain point in time. People are endowed with capabilities and what drives them. It is a package deal. Although these attributes may change over time, they are pretty constant over a longer period of time. It’s hard to change IQ, it takes time to acquire new skills and it takes a transformational experience to shift one’s intrinsic motivations.

External Conditions

A popular myth in western culture is “you are able to achieve anything if you really want it”. Well, I guess that may true – at least as the laws of physics are not violated- but I think a more accurate version of this saying would be “you are able to achieve anything if you really want it, but some things are highly unlikely”. But that kills the motivational intent of this statement, doesn’t it?

To excel as an individual the circumstances of your whereabouts matter.  You need external help. Malcolm Gladwell researched the question of individual performance and dug-out three factors that explain individual excellence best:

  • A supportive context
  • An environment full of opportunities
  • Deliberate practice, ten thousand hours of reflective, focused, professional practice

These claims have been scrutinized in a business context. One of those factors is not important in a business context: Deliberate practice.  Shockingly for Protestant work ethics, which stresses the importance of hard work, deliberate practice is of low value in a business context. It is important for sports and arts, yes. But not in the much more complex, muddled world of business.

A work environment that provides people with opportunity and assistance to perform and grow is very relevant, though. In all organizational or educational research about performance, these factors stand tall.

I have added a third factor: Accountability and Rewards.

In a business context, it is important what people are assigned to do: What is their accountability? People may have great capabilities, possess a great intrinsic drive to excel, they may be part of an organization that provides them with truckloads of opportunities and support, but if they are kept inside a small, narrowly described job they may not be able to fulfill their potential. People need to have the authorization to act.

And not all people are easily intrinsically motivated. Some people respond better to extrinsic motivation, such as money or status that is given to them by others. Extrinsic motivators, financial bonuses, key performance indicators linked to individual pay, are used quite regularly in business settings. They are effective if well used, but tend to crowd out individual motivations or may even encourage reckless behavior, as all those things which are not rewarded will be relegated to secondary considerations.

Combining intrinsic and extrinsic motivation is tricky. The safest path seems to be to rely foremost on intrinsic motivation and to use extrinsic motivators only sparingly.

The Magnitude of Performance: 10X?

Suppose that all internal and external conditions for individual effectiveness are given: What is the difference between the performance of the highest performers and the lowest performers?

An interesting narrative is given by Jeff Sutherland in his 20014 book “SCRUM”. Joel Spolsky, a software developer, compared the time needed to complete a standardized programming assignment at Yale University. Just focussing on those people who managed to get the top 25% of grades, he researched the time spent on the assignment:

  • The top 10% of performers needed 10 times less time than the low 10% of performers
  • The 10X factor was pretty constant over the years and classes

This narrative is showing what the performance differential can be in a laboratory setting. It is illustrative, but not more. In a business setting a quantification of individual performance is much more complex. Even for more routine jobs, such as call center agents, it is very difficult, as there are so many things that are hard to quantify and measure. In a normal line job measuring individual performance quantitatively is nearly impossible. What is the value added by an ordinary accountant? How does that compare to another employee, say in logistics? Therefore, in traditional business settings, one has to rely on qualitative, gut-based judgments of managers.

But two things are sure:

  • Even one good or bad decision of an individual might sometimes determine the fate of the company.
  • The sum of all tiny, daily decisions of all colleagues in a company does a lot to determine the overall performance of the whole company

So optimizing the work environment and management practices in a way to foster the conditions for individual performance is a sure winner. You might disagree with the conditions I laid out, but you absolutely need a yardstick.

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Individual Performance Does Not Equal Team Performance

A question for you: Is most work actually done by individuals or by teams?  That question may sound silly. After all, the sum of each person’s work makes up the work of a team. But here is another perspective: How much of work is actually already structured, in established processes and daily, habitual work practices and therefore does need much personal interaction? I guess the latter is actually the bulk of the work in most companies. I.e. my answer to the first question is: Most work inside companies is done by individuals and not teams. True team tasks, that require intense collaboration between people and can only be solved by their close cooperation, are rare.

I share that view with Richard Hackman, a professor who was specialized in the research of teams. According to Mr. Hackman, most departments are work teams. In a work team, work is parceled out to each individual by a manager, through job descriptions, processes and day to day delegation. Close collaboration, “a true team” as he calls it, is not needed.

Indeed, treating work teams as true teams is very wasteful. Investments in team building of ordinary work teams have no measurable benefits. None, nada, niente, aucun, gar nichts. Still, companies send their so-called “teams”, which are really Work Teams, to team building exercises.

Companies confuse work teams, which make up the majority of teams inside most companies, with true teams. What a waste of resources.

The preponderance of work teams in organizations highlights the need to have a consistent and holistic theory of individual performance in business. The one given above is my best shot.

Let me know what you think!

___

action adventure beach dawn
Photo by Pixabay on Pexels.com

This is part one of a series of articles on the underlying theory of performance in businesses.

More on the effectiveness of teams in the next article.

Sources

  • Gladwell, Malcolm „Outliers“, 2009 -> on the external supporting conditions to achieve “outlying” performance
  • Pink, Daniel “Drive”, 2009 -> On the the conditions of intrinsic motivation
  • Rosenzweig, Philip, “Left Brain, right stuff”, 2014 -> On the limits of deliberate practice in business
  • Keegan, Robert et al, ” An Everyone Culture”, 2016 -> On organizational learning that is built on individual growth

…and all the other books found on the Source page.

 

 

 

 

0 comments on “Book Review: Principles. By Ray Dalio”

Book Review: Principles. By Ray Dalio

Ray Dalio has founded and leads one of the worlds largest and most successful hedge funds, Bridgewater, worth 150 Billion$. Last year, and with great media fanfare, he launched his book to explain to the world his management philosophy. It’s a best seller, which is not surprising, given Mr. Dalio’s stellar reputation in the dominant business sector of our time: The guys making huge piles of money out of money: Hedge funds. Does all this money make Hedge funds or investment banks the real rulers of the world? You bet. The US government, the Senate, the Fed, International Institutions, the European Central Bank, the World Bank  – all full of ex-Investment Banker in leading positions. Even the former FBI director James Comey was a Bridgewater employee. The Masters of the Universe – and Dalio is one of the Grand-Masters of the Universe.

If a Grand-Master speaks out, you better listen. So I did. I read the book already a couple of months ago and did write a post about Bridgewater’s practices:  The World’s Leading Hedgefund is Relying on Key Principles of Self-Managed Organizations. But I delayed writing a full review: I was befuddled by what I read.

Outlandish, Orwellian Management Practices

Mr. Dalio is spelling out over 200 principles of “Work and Life,” principle by principles. Like the great Roman Emperor Marcus Aurelius did in his “Meditations.” How fitting.

Irony aside, I actually like the clarity and to read about the accumulated wisdom of thoughtful people. And Mr. Dalio is very thoughtful. He is driven by his worldviews, especially on management, and he share’s it with us. I think that’s grand, mainly because the management practices he employs are often so extreme and apparently over the top:

  • Video Taping all Meetings. All.
  • Giving performance feedback in real time during a meeting of every participant to let the person know how she is doing
  • The “Pain Button” app where people can describe their emotional stress and share it with others
  • The “Dispute Collector” app where people can mediate their interpersonal conflicts guided by a machine

Orwellian speech is rampant in “Principles.” Mr. Dalio talks of “tough love,” or “shoot your friend,” – all for the service of the collective.

The Rule of the Fittest

My favorite example of all those management practices is to let people vote on decisions while weighing these decisions with the “believability” of the person: An “Idea Meritocracy” where every person is eligible to vote, but only the most knowledgeable votes carry decisive weight. The believability is determined by their track records, test results, and other data. In other words: The reign of competence, instead of a reign of populists. Wow!

If only the standards that determine believability can be kept “objective” and free of corruption. Mr. Dalio doesn’t explain how to do that, but my hunch is Discipline. Adherence to formal systems, to the principles underlying the believability algorithm. Adherence to the formal system is prominent in Mr. Dalio’s business empire. Comply with the system or be fired. The attrition rate of new and very carefully selected employees is about 30% within the first year. And Bridgewater is very Elitist in selecting candidates in the first place.

Psychological safety, i.e., a safe place to speak up without the fear of retaliation, is a key feature of learning organizations or any organizations aiming at achieving innovations. Dissenters need to be encouraged. And yes, Bridgewater is a safe place to speak up, with even brutal honesty, as Mr. Dalio writes. People may even raise dissent with the system, and principles might evolve in consequence, if its ruling hierarchs choose to adopt them. But chances are that fear is rampant. Not the fear to speak up, but the fear of acting in a dissenting way, which is not in compliance with the ruling system, the principles. If everything is taped and visible to everyone, political correctness rules, and human fallibilities are suppressed. But control is maximized, too.

The central metaphor for the business which Dalio uses right at the start of the book is the machine. And as cogs in a machine people got to be kept inline, disciplined. Add to that that Mr. Dalio is very close to central figures of China’s ruling party, a country where a  lot of experimentation in social control is ongoing, and the pictures become genuinely, outlandish dystopian.

And whats more: His practices are actually embraced by Robert Kegan, a Harvard Professor of Psychology and one of the worlds leading proponent of the “learning organizations”. Money, Power, and Academia united to create a Dystopia. A possible future where the Rationale, Analytic, Performing runs Amok creating a new super-collective of connected super-minds, where the apparently “dumb” are ignored by the (believability) algorithm. This is can be labeled and sold as “Intelligent Democracy”: The rule of the one with the most merits. Not far from Darwins “The rule of the fittest”.

A Great Experiment

Let’s look at the bright side. It’s is a great experiment based on many of the principles of movements like Agile, Lean, the Learning Organization, Leading Management thinkers and Behavioral Organizational Psychologists propose:

  • Build more reflection into daily work routines in order to enable learning
  • Trust more in the power of the collective than in individual decisions makers through structured exchanges that drive out biases, to come up with better decisions
  • Give everyone a voice and a place and time to speak out
  • Use data gained from objective and subjective sources extensively
  • Address all level of the Organization simultaneously:  Mind-Sets, Principles, and Practices
  • Seek organizational growth in the inert, personal growth of individuals

Looking at Mr. Dalio’s work this way, there is a lot to learn about Bridgewater. Therefore reading “Principles” is absolutely recommended.

Long live Hierarchy & Control!

The most remarkable thing is, Mr. Dalio has added all these routines on top of the traditional management hierarchy.

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(For more on Management Practices and Maturity Level check out some of the previous blog posts 76 Agile Workouts & A Fish and Let a Thousand Nerds Blossom!)

In all of the 539 pages, he does not write a single line about self-managed teams. But the other times he uses the prefix “self” is revealing: Self-accountability, self-discipline, self-reflection, self-accountability. It is the individual how needs to better herself. By sticking to the collective rules set by, well Mr. Dalio. Or the Chinese communist party…

Mr. Dalio trusts the individual to get better under guidance, he trusts collective, believable weighted votings, as long as

  • Superiors may veto any decision and
  • Mr. Dalio (or a governing elite) sets the rules

At the heart, Mr. Dalio’s vision is not about liberation. It is about performance. About making money. If what it takes to make money is to develop individuals, so be it.

But Control is central. Full stop.

Bridgewater might be a great Place for Fawning Alphas

I like organizational designs more that give space for autonomy (a word not found anywhere in the book) and non-mainstream people – call them beta if you want.

Whats more, true innovativeness will not come from an environment that is purely ratio driven and relegates fun to an emotion that is to be reflected on and analyzed – all in the service of big performance equation that is to be solved.

The featured sentence on the promotional page of “Principles” is “Principles are ways of successfully dealing with reality to get what you want out of life“.

A bigger car, I guess. This Hedgefond even wants to exploit life itself. Putting such a line in front of the whole work shows what Frederick Laloux would call intensely “orange” beliefs, beliefs bred in the industrial revolution: It’s about getting things, about scarcity, about accumulating, and finally about consuming life itself.

I am a bit harsh, though. It’s is worthwhile reading:

 It shows how the application of Agile/Lean/ Behavioral Sciences while being stuck in a Mindset of scarcity and control – instead of abundance and exploration- may quickly lead to dystopia.

___

This is what I think. What do you think?

 

Sources

 

 

 

 

0 comments on “Experimental Management”

Experimental Management

Meet Emil and Marc. Emil just signed a contract to work for Marc. This makes Emil an employee and Marc a manager. With his signature, Emil has agreed to follow the orders of Marc. Disobedience is an option, but it comes with the risks of being fired.

Marc the manager points Eric to chop a stack of wood. By doing this Marc is using the most basic form of a management practice, the direct order. Next day, Marc orders Eric to stack the firewood on a need pile in that corner over there. On the third day, Marc is late. Eric sees a stack of wood, and being human and not an automaton, starts to chop it, like on day one. Without knowing, Eric has developed a job description for himself: “My job is to chop wood and staple it”. The job description is another basic form of a management practice. It spares Marc the Manager the time and effort to direct Eric. Unlike a robot Eric the Employee is able to see the work and do it, without being ordered. Marc may continue to supervise Eric, but he might find a better use of his time in carting the firewood to the market and sell it.

One day, after a heavy rainfall, Eric sees that the roof of the shack, where the firewood is stored, needs repairs. Without being ordered, he fixes the roof. What Eric did is to use his judgment of Marc’s interest and decided to act autonomously. Marc has not directed Eric to do that, but Eric has developed a sense of purpose in his work, and chances are that he feels responsible for it. Marcs comes back later in the day and wonders that Eric has not produced his usual stack size of firewood, but he sees that the shack is repaired. Marc may tell off Eric for not making the numbers, but he decides to praise Eric for having taken the initiative and prioritizing repairing the shack over his chopping duties. Thereby Marc has embraced another two basic management practices: Feedback and Delegation. Eric is no longer just following orders but he is empowered to do other things necessary to keep up the production of firewood.

Why has Marc opted to praise Eric and accept his autonomous acting? Marc, hard pressed to make living out of his business, see’s those management practices as being efficient. In his mind, Eric has saved him a lot of trouble, as wet firewood doesn’t sell. Marc may not know it, but he has developed the performance hypothesis in his mind that Job Descriptions, Feedback, and Delegation produce better results, than just ordering Eric the Employee around. Marc the Manager benefits from adopting those Management practices. Eric the employee likes being responsible, too, which is part of why these management practices are working. But even if Marc didn’t give a damn about Eric, he knows he would hurt himself by not employing these practices.

Over time Marc might decide to adopt other management practices, like

  • a regular, weekly meeting to discuss issues
  • providing a budget to Marc that he can spend on axes or saws
  • a bonus scheme based on Erics productivity
  • job sharing, so that Eric is assisting Marc at the market from time to time, in order to get a larger picture of his duties and exposure to customers
  • Annual objective setting and performance review  to clarify high-level targets for Erics work

Marc the manager will introduce and maintain these management practices only if he expects that these contribute to the performance. Margins in the firewood business are so slim these days.

The Case for Constant Experimentation with Management Practices

Shouldn’t any company seek to emulate Marc’s way of working? Things like…

  • Adding new management practices if they work
  • Getting rid of those that don’t seem to work
  • Constantly adapting practices to the need of the business

In a business world that is ever-changing, why do we emphasize so much the need to act like a daring entrepreneur, who finds ever better problem-solution fits, but overwhelmingly fail to engage in experiments with the very ways we are working together? Instead of seeking to constantly improve our way of collaborating with one another, we focus hard on business models, productivity figures, financial performance.

Marc would see that fixation with direct business results as being silly. Results are important, yes, but they can not be enforced directly. Instead, they need to be approached obliquely, by working better together. If we can achieve that, results are not guaranteed, but they will come much more easily.

What is a business if not a sum of decisions taken at all levels of the company? If we can just increase the quality of decisions by some minuscule percentage point, isn’t a companies performance bound to increase? Better management practices result in better decisions result in better performance.

Management practices are like the underlying factors of a companies performance formula.

  • Company Performance = f (Strategy, Execution, Chance)
  • Strategy and Execution = f (Management Practices, Chance)

In other words management practices, the way work in done, influence a companies ability to come up with a good direction (strategy) and competent implementation (execution).

This sounds like a no-brainer. But there are three caveats with this logic:

  1. Managers do not care too much about the performance of management practices
  2. Owners care about performance, but can’t really observe the impact of management practices on performance
  3. The empiric, scientific evidence of the link between management practices and company performance is weak

Manager’s Do Not Care so Much About Performant Management Practices

Marc the manager holds four distinct advantages over most other managers:

  1. Direct Feedback: The impact that the management practices he adopts have on Eric’s performance are very direct
  2. Underlying simplicity: The firewood business is simple. Causes and effects are directly visible
  3. Small numbers: It’s just Eric the employee, not a group of employees or a host of departments to coordinate. This spares Marc the manager from the otherwise inevitable power and social dynamics
  4. No agency problem: Marc is the owner and the manager. He is able to prioritize performance of the business very highly – his performance and the business’s performance are the same. Managers, who are not owners, quickly see their well being and the businesses well being as two separate things
  5. No ingrained, legacy practices: Most managers join companies that have a certain way to do things, a certain management culture. It’s much harder to experiment with management practices if social norms are already firmly entrenched

For a typical modern-day manager, it is not only much harder to see whether his way of managing works better than other ways. On top of that, an employed manager does not even share the same passion for performance than an owner. Risk minimization by not sticking out one’s neck, social conformity and self-optimization might be more important than performance optimization. The fact that the performance of one’s management practices employed can’t be measured easily compounds this agency problem.

The result is that performance becomes a secondary concern while selecting management practices. Control is much more important.

Owners Can’t Really Tell What Management Practices Work

Owners care about performant management practices, don’t they? After all, it is their money that is wasted. But even owners care for performant management practices is limited:

  • Ownership might be diluted. If an ownership share is sufficiently small, influence is very limited.
  • The Agency problem, again: Managers, who are in day to day contact with the business know a lot more about the business they are managing than owners. Owners might employ a few checks on managerial powers here and there, but finally, owners have no option, but to trust.
  • There are other factors easily observable, like those found in the P&L or balance sheet. By their very nature management practices do not lend themselves to be measured in hard numbers. Humankind is excellent at measuring financial systems, but we suck at measuring social systems

The point that I am making is not that no one is not concerned with the performance of organizations. Indeed, there are many people caring about profits and corporate outlooks. The point I am trying to make is:  Few people are making a major effort to influence the performance of an organization by virtue of its management practices.

Science found a bit of evidence, just a bit

Financial performance is a primary concern for any company. But it is usually tackled head-on by looking at market share, product portfolio, customer bases, competition, cost structures, distribution networks, business models etc. Management practices get into view only with hindsight: If a company is successful, it must have great management practices. Phil Rosenzweig, a professor at IMD in Lausanne,  has written a whole book about the ex-post sanctioning of management practices. He named this the “Halo Effect”. Huge business books bestsellers like Jim Collins “Good to Great” or its predecessor “Built to Last” or Robert Watermans “In Search of Excellence” fell for the Halo effect. Great stories, but no scientific value.

But there are a few recent studies that imply a link between good management practices and a companies performance. According to one of those (Bloom et al 2011)  management practices explain about 10% of the success of companies. And according to another study (Bloom, Mahajan, McKenzie 2011) that link is causal, i.e. management practices improved first, company results followed.

That is not overwhelmingly strong evidence. But this is only natural: We just can’t measure social matters with the same exactness as physics. Social systems are highly idiosyncratic things. Take for example the human invention of the stock market. The way prices on the stock market are determined is a result of the human social system, the value humans attach to the stocks listed. Despite hundreds of billions of investment, no one can predict stock values with any certainty. Great efforts are being made in analyzing stocks, but finally, all this effort is undermined because we suck at measuring social systems. It hard to predict human behavior with certainty. Social systems are even more complex than the individual human actor, so science is bound to fail. There are no social physics, no immutable rules. There are things that appear to work for a time, but that is no guarantee that those correlations will hold in the future.

Experimental Management

To sum up my argument:

  1. There is a clear logical link between management practice and a companies performance. The sum of all decisions of all employees should make a great deal of difference to a companies success.
  2. There is academic evidence of this link, but it is weak
  3. Owners and Managers prefer management practices that work over optimal management practices. All sing the hymn of performance, but asymmetrical information, the pure opacity of causes and effects in social systems and individual incentives let them focus on the observable, largely financial facts, instead of the underlying intangible social performance of the organization

My point is:

  • If we can’t say what management practice is really working, why are nearly all companies keeping their management practices static?
  • Do such companies suppose they already found the optimum?
  • Those companies implicitly assume that there is nothing to gain from experimenting with management practices
  • Is it not silly that Lean Start-ups, Entrepreneurial and Agile Movements all have a strong emphasis on experimentation, but experimentation with management practices are of a (at best) secondary concern for most companies trying to become fit for the Digital Age?

Therefore, I suggest Experimental Management. If we don’t know what works best at that time, we need to try things, observe the effects and tune and tune and tune our way of “doing things in a group”, of managing.

We do not need big theories of Leadership and Management for this. We just need to experiment and watch. In other words, managers need to work empirically, not ideologically. Find out what works themselves and not following snake oil selling business book authors, leadership gurus or opinionated non-empirically focused consultants.

Liberation?

Experimental Management is a term that is slightly provocative to our cultural norms. First, we expect competent management that knows which practice works. Dabbling in management practices smells like incompetence. We want certainty. For certainty, we are ready to prefer the professional illusionist to the empirically driven realist.

Second, we shouldn’t subject humans to experiments. Manipulating humans is rightly abhorred. We value freedom and self-fulfillment.

My hunch is that experimenting with better ways to work, will lead to more freedom and more self-fulfillment in the workplace. Why? The only way to get better decisions is to employ the abilities and senses of all the people in an organization. And we can’t get that level of engagement without offering more freedom and self-fulfillment.

The arch-capitalist quest for performance might just end up liberating people. 

___

Sources:

  • Rosenzweig, Phil “The Halo Effect”
  • Bloom et al “Mangement Practices Across Firms and Countries”
  • More information about research on the link between management practices and companies performance can be found on WorldManagementSurvey.org

 

0 comments on “The Main Managerial Fallacy and the Full Stack Manager”

The Main Managerial Fallacy and the Full Stack Manager

The way most managers do their job is rather dull. It all begins with the very basic assumptions that managers have about their job. Most managers frame their job as being three things:

  • to lead some people
  • to make most decisions
  • to balance the organizational needs of performance with the needs of the ones performing

Basically, they think they are in charge. Which is perfectly right, only that they picture themselves to be in charge of the wrong things:

The Managerial Fallacy

Managers usually think of themselves as being in charge of a performance mission …but they are really in charge of getting people to do things.

This difference between these two frames is far from being subtle.  Being on a performance missions triggers you to think in terms of the mission, to dissect it into its component parts, to reassemble it into a better organizational machine, and to place the workers to operate that machine. It triggers a rational process of solving a performance problem.  This is exactly the thing we have been trained for at school and at universities. This way of working feels natural and comes easily to us. The frame is: “I am in charge of running this”. But it is wrong.

Analytical analysis is an optimal method to solve a mathematical equation, a physical, mechanical or most problem in natural sciences. Given sufficient information, you can rely on the stable causality of the natural laws to come up with an optimal solution. But an analytical approach does not work in social sciences. Here you never have all information, as the information does not lend itself to being measured well. Plus causalities are always hidden and unstable. You can’t predict individual behavior.

In such a much less predictable, social environment the best method to proceed is not an analytical one. It is an empirical one.  You need to try things to find out the best way of doing things instead of assuming that you found the optimal solution. In social systems there is no thing as an optimal solution, there are only solutions that work better at a certain point in time. People and organizations are volatile. The whole business environment is more and more volatile in this digital age. A stable optimum needs to be replaced by neverending tinkering to always try to come up with a better solution.

Therefore the much superior frame is: I am in charge of getting people to do things.

This frame prompts a manager to:

  • tinker for a better solution, continuously
  • to lead people in such a matter so that they can do things better
  • to consider oneself as a manager of a socio-technical system, the performing organization, not of a mechanical device with measurable in and outputs
  • to understand the work of a manager as a craft. A craft that is to be perfected over time, through tinkering, try, error and learning

After all, management (or leadership) is about this:  Getting people to do things. It is not primarily a problem to be solved by the manager. It is not constantly firing a barrage of orders or motivational messages, as this would be tiring and therefore ineffective. But it is about creating an environment where people do those things that need to be done because they want those things to be done.

Dwight

That environment is built from of Management Practices which are often unlike the ones we commonly take for granted. Here is a comparison.

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Management practices are the building blocks of the craft of management. There are hundreds or even thousands of management practices available. Many of those practices have their origins in the Agile or Lean Movements. But the goal is not to adopt as many advanced practices as possible. First, these are not necessarily better than existing ones in the context of a specific organizational challenge. Second, adopting too many practices means creating a highly regulated work environment. This is contra productive. The target is to create an environment where people do those things that should be done because they want to do those things.  Keep it simple – allow freedom.

The Full Stack Manager

Let’s summarize this modern understanding of a more clever way to manage. A manager is:

  • the builder of environments
  • the provider of freedom
  • the one who connects the performance missions of an organization to the calling of the individual
  • the one who experiments with different management practices in order to find ever better ways to engage groups of people

If you continue on this line of thinking, an optimal scenario to run a sociotechnical system may be to even delegate designing, building and running this system more and more to its component parts, i.e. the people doing the work. By going down that path you end up with a self-managed organization, that has left behind the hierarchical way most organizations are organized.

While this is attractive to more and more companies – even parts of the likes of Daimler, Porsche, Unilever, and Michelin – not to talk of AirBnB, Netflix, Haier etc. – this is not a natural given end state. Hierarchy, as an easily understood, time-proven coordination mechanism has its merits.

Nobody can say where the optimum is for your organization. Nobody can say which management practices are best for your organization. But you can find it out: Tinker, you Craftsman!

A Master Craftsman in the trade of Management is what I would call a Full Stack Manager. One who knows how to run meetings, to know how to create transparency, to know how to make decisions, to know how to create a feedback and learning-rich environment etc.

So, why are managers (so often) dumb?

There are a number of explanations:

  • Peter principle: Everyone is prompted to her or his level of incompetence. Only the competent get promoted. But their career stalls when they are incompetent. This leaves most managers incompetent. This logical argument is a heuristic, that is hard to prove or to disprove.
  • Principle-Agent Problem: Managers may appear to act incompetent, but they really have their own agenda. This agenda might entail risk minimization (or – less often -risk-taking), personal enrichment or aggrandizement, or just having a good time. They should be taking care of the organization, though. Alas, the amount of information that the principal (a superior or shareholders) is always less than the information the agent (the manager) has.
  • Getting things done is more important than doing things great: Success in business is a function of doing the right things on a strategic level, good execution and a good dose of luck. It’s not fully correlated with good management practices. In fact, there are studies that suggest that just 10% of a companies performance is related to good management practices.In other words: You do not necessarily need good management to succeed. Survival is mandatory, performance is optional.
  • Human Nature: Power corrupts. We tend to warm ourselves in the shine of it, making us blind to things going bad and feeling entitled to the status quo.

All of this is true and there is not much we can do about it.

But what we can do to decrease our dumbness as managers is to reframe management from “a solver of performance equations” to a “Gardner of socio-technical performance systems”.

Or to say it in simpler terms: From a Scientific Manager to a Gardner of Sociotops.

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Let me know what you think.

Sources:

I am such a sucker for recency bias. So here is what I read last and which therefore didn’t fail to influence this post:

  • Nissam Taleb, “The Black Swan” and “Antifragile“. Both great book if you want to learn the differences between physical and social systems
  • Phil Rosenzweig, “The Halo Effect“. If you want to know why 95% management literature are stories, but not science, read this. The bad thing is, you will be deeply depressed. The good thing is, re-read this article to cheer-up: Experimentation is the way to go, not dogma.
  • The other books I happened to rate highly on the Sources page

Other than this have a look at