0 comments on “The Lust For High Performance”

The Lust For High Performance

Welcome to part 7 of the series on high-performance teams. A series which strives to make the works of Richard J. Hackman, a or maybe the leading researcher on team performance, more accessible.

We are leaving the realm of the first 5 factors which are more like the physical parameters of the team. And we are entering the realm of the intangible, the spirit of the team. Team spirit won’t be a physical part of the teams’ work, yet without great team spirit the work might never be done and the work itself might be arduous. The team might never fulfill its meaning, without a team spirit that suits its ambitions.

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Condition VI: The Feeling That My Works Does Matter

Let’s take stock. What do we have for our high performing team by now? First, a compelling direction to orient the team. Second, a true team task that makes sense to use a team at all. Third, a small sized team so that people can bond with one another. Fourth, clear boundaries that guide efforts. Also, fifth, a good composition of skills to get the work done. That is all good and fair for the team. However, what is in for me, the individual team member? What is my role in this so carefully staged exercise? Why should the teams’ work be important to me?

Each team member needs something to tie her own motivation to within a team.

What that thing is that amalgamates the individual, and the team effort varies from person to person. It can be an extrinsic motivation, like not being fired, money or sometimes status from just being on a team. The problem with extrinsic factors that tie a person towards a team effort is often that the level of engagement will be limited. It is the nature of complex situations, the types of problems teams need to solve, and of knowledge work in general that the relationship between personal in- and outputs and the performance of the team is hard to observe. To rely on extrinsic motivation exclusively will often result in people just putting in token efforts.

For more profound levels of engagement, intrinsic motivations must be tapped and tied to the team’s efforts. There is a specific model that is describing how intrinsic motivation works in a business setting: Job Characteristics Theory. This theory is a cornerstone of the field of organizational behavior and work design. What this model is basically saying is that intrinsic motivation in a work setting rests on four fundamentals ways how people like to work:

  • Skill variety: People do not like doing boring things all over and again. By doing things that utilize multiple skills, work is less repetitive and more motivating ()
  • Task identity: People want to achieve something visible like a thing produced or service done for a customer
  • Task significance: People love to impact other’s lives positively by doing something that they feel increases a customer or a coworker’s well-being
  • Autonomy: People like to do things the way they want
  • Feedback: People like to know how good they are at work. Detailed information on the way they performed. Not to be controlled, but to improve and to feel good about their efforts more often by doing so

These motivators are deeply ingrained in our cognitive DNA. We long for job variation and dread repetition. We want to do the work on our own terms and not being coerced into behaviors that do not make sense to us. We like to see, touch and in any other way ever feel what we endeavored to create. We love that even more if the results of our work matter to other persons, and we are getting better in the things we are doing all the time. If people experience all those five factors while working they feel that what they are doing has a positive psychological impact on their lives: Work has meaning for them – they feel the impact of their work.

It is the “striving” that is intrinsic to every one of us: The longing for mastery, autonomy, and purpose, that we have explored in the other posts of this blog. By being part of a team people do not put aside these longings. They are as strong as ever.

Non Conformity and Anti-Learning Stances

However, people differ. Some people value connectedness to others less, some more. Some people revel in autonomy others are frightened by too much of it. The disposition towards Feedback, to get to know “how good one is ones work” varies strongly, too. Some people like to get feedback to learn and improve, while others revel in groupthink, hubris and a state of failure denial. Systematic anti-learning stances are not uncommon in individuals, groups or organizations. Furthermore, autonomy, “doing things the way they want” might help intrinsic motivation but might hurt performance, as results might be more varied or less than optimal.

But the existence of anti-learning stances or the non-conforming autonomous individual going ways that lead astray from team performance do not invalidate the model. The five pillars of the job characteristics model still provide the critical ingredients to intrinsic performance and therefore give the highest chance of job- or team performance. Indeed, the risks of things going astray for the team can be mitigated. A great way to do this is to set norms.

Condition VII: Social Norming that Fosters Performance

Certain behaviors of teams and team members are more beneficial for performance than others. Norms specify those coveted behaviors. Regulating behaviors is, more often than not, a deeply unpopular or even impossible act. If people can, they will ignore any inconvenient norm. The trouble is: Norming of behaviors is unavoidable. Every team will inexorably end up with a set of norms that regulate acceptable and non-acceptable behavior as there is a natural tendency of people to adapt their behaviors to fit themselves into a group.

Instead of ending up with some random behavior, i.e., norms that just so “happened” to the group, it is better to establish norms inside the team that has proven to be beneficial to performance. Norming may be unnatural, but it certainly is useful.

There are three reasons why performance norms are important. They encourage the team to engage with the outside, they embed the team safely inside the organization, and they foster mutual dependability.

1. Outward Looking Norms: Engaging With The World

These norms are meant to encourage the team to engage with the outside. They regulate how the team is engaging with the world (i.e., the customer, the organization or anyone else not in the team). Typical questions are

  • How does the team get feedback from customers? In what form and frequency
  • How are the stakeholders involved in the project? Who is on the steering board
  • How does the team engage outside experts? In what roles and intensity?

Left to its own devices, without any conscious norming, teams are likely to under-engage with the outside world. Engaging with the outside world is stressful. It means customers are giving inconvenient or non-conclusive feedback, stakeholders hedging their bets in the game of organizational politics, experts providing advice that hard to understand or to adapt to the local situation. But it is needed for success. More than that, the team’s very reason for existence is the deliver results to the outside world. Therefore, norms that encourage the team to engage with the outside world are right front and center of effective teams. These norms describe the performance ethics of the team: The lust for high achievement.

Performance norms are at the heart of the Agile Movement, the SCRUM project method or the LEAN Start-up Movement. The customer with all its idiosyncrasies and ever-changing requirements are right in the center of all these hugely successful methods. Take SCRUM: It demands a product owner, arguably the most central role in the whole method, to fully immerse into the needs of the customer. It postulates working at short intervals to keep the feedback from the customer coming in, continually honing the team’s directions and ways of delivering value.

SCRUM enshrines performance ethics in a set of practical, dogmatic rules.

2. Organizational Conformity Norms: Avoiding Attacks By The Immunity System

The second reason why performance norms are crucial is the survival of the team in the organization. Performance norms specify which behaviors are acceptable and which behaviors are unacceptable to the overall organization the team works in. Every organization has its established norms, and a team just can’t pretend that those do not exist. A short list of “Do’s and Don’ts” suffices. The target of such a list is defensive. It is to prevent the immune system of the organization to attack the project. Every project brings change, and the impetus to changes invariably drives resistance. By specifying behaviors that are helpful to get the teams work effort accepted by the organization, much is done to remove the organization from the list of impediments to a team’s success.

3. Mutual Dependability Norms: Learning To Rely On One Another

Every team effort is laden with moral hazards and frustration Slacking-off, free-riding, and a sense of being impotent to influence results are all contributing to project debt. These hazards are immanent to a team, and there is no way to get around them. However, establishing team norms that foster mutual dependability help to pay off the debt.

There are a number of ways to do that:

  • Clarify roles and responsibilities of team members: Role descriptions and discussions about roles in each phase of the team effort help team members to understand what is expected of them and others
  • Feedback culture: Giving each other feedback on behavior or decisions fosters understanding inside the team and creates a bond between each member
  • Drumbeats: Regular meetings, like SCRUM’s daily Stand-up, the sprint review or the retrospective, fosters mutual accountability. This is true for every regular meeting, as long as people are not just called to or incentivized to speak of but have an obligation to speak up. A meeting format that enforces the active participation of everyone is vital.

In general, the strengthening of conscientious behavior of team members is essential. Conscientiousness is being careful and vigilant. It implies a desire to do a task well, and to take obligations to others seriously. In psychology, conscientiousness is viewed as a personality trait and is therefore mostly unchangeable for the individual. However, in a team context, it can be built into the team’s procedures, by adopting, for example, the routines mentioned above. Over time, people implicitly accept conscientiousness as a norm for the team, even if some members are not at all conscientious but the opposite: Laid-back, less goal-oriented and less driven by success.

Mutual accountability has a lot to do with respecting the other team members. Not everyone wants to treat the office as a social club, and not everyone wants to work in an environment that is all about performance. Still, it is generally not a good idea to include only conscientious people in a team, as those people tend to be less creative, less adaptable and more driven by the urge to conform to expectations and rules. Again, the combination of personality types creates the diversity that positively impacts team performance.

Mutual accountability has a lot do to with respecting the other team member – but respect isn’t a privilege: Respect earned by working with one another and delivering results.

Why Other Norms Are NOT as Important

If performance norms are not deliberately set, other norms will form over time, by the norms brought into the team by the history and experiences of its members. These norms are more about the relationship between the team members than about outward focus. Norms will emerge that center on harmony, as harmony is in the direct interest of the group and every member. Furthermore, difficult decisions in the team’s future won’t be anticipated or actively avoided, to keep harmony. This gives rise to norms of reactivity, to just deal with whatever comes the team’s way at the time the challenge arises. The team under-invests and will pay a high price later in the team effort. Typically, these questions that should better be solved at the start of the project, are about

  • which persons with which skills and capacity to include in the team,
  • which elements are in or out of the scope of the project,
  • a projects time frame and budget.

As every experienced project manager knows, to avoid conflicts early means to face much more significant problems later on.

Every team will create additional norms over time, like certain meeting etiquettes, email and responsiveness ethics or office hours. Research has proven that any of these secondary norms, as Richard J. Hackman calls them, are by themselves not significant for the performance of the team. Other norms are inevitable in the forming of the team, but any secondary norm that is acceptable to the team is as good as another – as long as the performance norm remain intact.

Performance norms connect the compelling direction of the team to an ethic of risk-taking and performance. Consultant and Author Jon Katzenbach calls performance norms „the all-important connection between risk-taking and team performance”. 

As boring as the word “norm” is: Norms foster in every team member a lust for performance.

Who would have thought that Norms have something to do with lust?

___

I am still busy writing on my book about “Liberated Companies” and I won’t bother you with another post in this year.

Merry Christmas to all of you!

box celebrate celebration christmas
Photo by Pixabay on Pexels.com

 

Sources

  • Hackman, Richard (2002) ‘Leading Teams’
  • Job characteristics theory has been developed by Greg. R. Oldham and J. Richard Hackman in 1975, see https://en.wikipedia.org/wiki/Job_characteristic_theory
  • The term “performance norms “or “performance ethics” is a central, recurring, element of Jon Katzenbach’s 1993 classic book, „The Wisdom of Teams“
  • Hackman calls the three norms (Outward Looking norms, Organizational conformity norms, and Mutual Dependability norms) “primary norms”, and all other norms, that have proven to be not very significant to a team’s success “secondary norms”. Actually, Hackman stated just two primary norms, outward looking and “behavioral boundaries within which the team operates”. I took the liberty to split the latter norm into to “organizational conformity” and “mutual dependability” for the sake of greater clarity. This split although aligns well with Googles project Aristotle, where “mutual dependability” has been one of the 5 factor of team success and Jon Katzenbach, “Wisdom of Teams” 1993, for whom Mutual Accountability is key to team’s success.

 

2 comments on “Why Most Companies Should Not Seek to Work in Teams”

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’.

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. 

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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