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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.

 

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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.

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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.

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’.

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.

Screenshot 2018-08-13 09.39.19.png

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.

Screenshot 2018-08-13 09.23.00.png

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.

nietsche.png

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 “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 “My CV of Failures”

My CV of Failures

Unless we try, we do not learn. But if we try, we will fail from time to time. I tried a few things in my business life which did not work out. Things that are never mentioned in any official setting. Here are what I consider to be my biggest blunders.

My CV of failures

  • 2000/2001 Not sustaining the Startup I co-founded for longer than a year
    We wanted to build a cloud solution for managing B2B contracts (Links2U.com) on marketplaces. Then the 2001 dot.com bubble burst. We were forced to earn money doing services and not building the product.  But I guess the dot.com bubble is not really to blame: Our business idea was a bit too early & a bit too academic
  • 2008/200Not being promoted to Vice President at Capgemini: Despite all my success in managing projects – my skill and interest in sales have been found wanting. I guess these observations are still correct.
  • 2011 Not getting a Culture of Experimentation going: Who is to blame for today’s sales? Always the weather! I wanted to move beyond that and use experimentation and statistics to help to guide our efforts to run our European Store network. But the methods I used didn’t stick across the organizational silos – all reverted more or less back to the status quo ante after a year. There were always other things to take care of.
  • 2014 Costly negotiation with Microsoft: In negotiating an important group-wide contract on Office365 I failed to invest enough time in building my next best alternative. The skillful negotiators on the other side saw through the veils I employed to obscure that fact. We overpaid.

Failures are embarrassing…

We all have been groomed for faultless performance. That is what schools, universities, and businesses aim for. We have, consciously or not, transferred the basic performance ethics of the machine to the human social sphere: If only everyone would do the assigned job without any fault, the organization would enjoy success. Cogs in a machine doing their jobs.

Therefore we hide failures instead of learning from them. We might reflect on failure silently but rarely choose to talk about them with other people in the organization.  For the sake of keeping our outward appearance shiny and clean, we miss out on a great learning opportunity.

..but vulnerability is a must in high-performance organizations

We fear to be vulnerable. But Vulnerability is one of the core features of truly agile, innovative, liberated organizations.  One can only truly engage with others, if it is safe to speak up and if ego is not in the way of a better solution.

Looking back, one can argue that I did not fail enough: I should have tried more often and aimed higher. I could respond to that: I did try often and aimed high, but I just had success more often than I failed. Alas, that would be a lie. Careers in traditional businesses are made more by avoiding failure than by seeking success:

A failure makes a powerful narrative that may destroy careers. A success is often not more than a statistic.

So the better, time-tested career tactic is to not try too much.

Battles not picked

A second, lesser class of failure could be those times where I might have picked a battle but did not. These are more numerous.

  • Not pushing the envelope in a major global implementation. Instead, I choose to support it but husbanded my energy.
  • Not facing up to a company crisis and help to turn around the company at all costs. Instead, I choose to cut losses and leave.
  • Not transforming a company into a fast, real-time driven business with a masterful supply chain. I weighed benefits, costs, and risks and walked away from this vision. I still deem it feasible, but not in every circumstance.
  • Not driving google cloud adoption all over the company. Instead, I choose to focus on customer demands, which might have been short-sighted.

Success lies in the skill of knowing which battle to fight, and which to avoid. I might have been clever to avoid those battles. Or not. One will never know until one tries.

Failures are Silent Evidence

I think that people should not only be described by the things they have done and succeeded. Failure is an integral part of what a person is. Failures are silent evidence. Being open about it, without “humblebragging”, might be beneficial for everyone around.

Are you willing to be vulnerable?

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This blog is about finding better ways to manage organizations in this more and more digital age.

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