Posts Tagged ‘Strategy’

Driving higher engagement – 6 rules for Smart simplicity

January 26, 2014

“Things should be made as simple as possible, but not any simpler”. Albert Einstein

Why is productivity in some organizations so disappointing? Despite all the innovations in technology and all the investment in training and developing employees and managers to adapt to more and more complex organizations, why does it appear (and statistics would seem to bear this out) that a significant number of workers are disengaged from their jobs and feel unhappy at work?

In his insightful presentation, Yves Morieux gives his views on the main drivers of employee disengagement. More than that, he offers 6 simple rules for driving employee engagement and higher productivity.

For Morieux, traditional approaches on how to engage employees to be more productive have up to now focused on two main management pillars:

  • the “Hard” pillar which seeks to improve productivity by working on structures, processes, systems, statistics, KPIs,…
  • the “Soft” pillar which seeks to work on the interpersonal communication and personal relationships, the traits and personalities of the individuals in order to help them adapt their personalities to the constraints of the organization

Many companies spend large amounts of money on reengineering their structures, processes and systems in order try to drive higher productivity and engagement and/or on training their managers and employees to adapt to these new structures, processes, systems.

But for Morieux, these two pillars of management are obsolete and are even counterproductive. Why?

All organizations are becoming more and more complex and by trying to improve engagement using one or both of these two traditional management pillars (work the structure and train the people to adapt), they in fact only add on more complexity.  Rather, they add on layers of “complicatedness” to an already complex environment.

For example, in the car industry, a drive to reduce repair time led to the creation of a specific “repairability” requirement which in turn led to the creation of a specific “repairability” function, the role of which was to align design engineers to repairability objectives. This inevitably led to the creation of a specific “repairability process“, a “repairability scorecard” and “repairability KPIs “to measure engineering  alignment to process objectives. But when one considers that there were 25 other competing functions each with its own process, scorecard and KPIs, very quickly one realizes how complicated it was for the engineers concerned to comply meaningfully with so many competing constraints and requirements and for “Mr Reliability” to impact positively on the “repairability” issue in a meaningful way.

The inevitable result is that rather than improving productivity, such a traditional approach only complicates things by adding extra layers of administration, back office work and non added value tasks. Costs are higher for zero results.

The secret for Morieux lies in not drawing additional boxes with complicated reporting lines or adding on extra organizational layers. It lies, as he says, in understanding the “interplay“, the connections and cooperation required between functions to deliver the required result. In simple terms, what is key is how the parts “cooperate” or should “cooperate“. As Morieux points out, “every time people cooperate, they use less resources and not more“.

Conversely, when functions don’t cooperate, they always need “more time, more systems, more processes, more teams….which means higher costs. 

But who pays for this?

Not the shareholders. Not the customers. Individual employees must eventually pay by overcompensating for the lack of functional cooperation  through higher effort and this inevitably leads to burn out, stress, disenchantment and disengagement.

Faced with such productivity problems, the “Hard” management pillar seeks to add on extra boxes to the “organizational skeleton”. The “Soft” pillar believes that if functions  like one another and fit better together, this will solve the problem. But in fact, the result is often the opposite because to maintain the relationship, functions will seek to add on extra organizational layers expecting these extra layers to resolve the conflicts or deliver the tough trade offs required which they don’t want to address themselves  for fear of endangering relationships.

These two approaches are therefore obsolete in a complex organization because they only generate unnecessary complicatedness and Morieux offers instead 6 key rules for smart simplicity :

Rule 1: understand what people really do.

We need to go beyond the job descriptions and the organization charts and understand what others really do operationally so that we know how different functions depend on and interact with one another. The designer should understand the consequences of his design for the customer services team and for the repair teams before he commits a design and generates costs further down the line.

Rule 2: we need to reinforce the role and powers of the  integrators.

Integrators are not middle offices but managers who must  “have an interest in and be empowered to make others cooperate“. How do you empower managers? Firstly, by removing unnecessary organizational layers. When you have too many management layers, you have more and more managers who are  “too far removed from the action” and who need “KPIs and score cards” to see reality.  What they see is not reality but a proxy of reality. Secondly,  you also need to simplify the management rules because the bigger and more complex an organization becomes, the more you must give discretionary power to managers to solve their problems at their level. Quite often, we do the contrary and we end up by creating huge systems of rules which freezes initiative and drains local managers of responsibility. That doesn’t mean that there shouldn’t be rules but it is vital to ensure that the rule book is lean and that managers can act effectively and quickly.

Rule 3: Increase the quantity of power to everyone

If you want more employees to take initiatives and “engage” more with the organization, you must give more power to everyone so that they feel they can use their initiative and intelligence to good effect and that they have all the cards in their hands to make a difference. Only then will they be ready to take risks and really seek to cooperate meaningfully with others.

Rule 4: Create a shadow of the future

You must expose employees to the consequences of their actions by constantly creating feedback loops, thereby creating a shadow of the future.  This is what the car industry did when they told  design engineers that they would move to the after sales service three years on so that they would have to live with the consequences of their own designs. If you empower more people, you must also ensure that these empowered people get effective feedback on their actions so that they are constantly  adapting their behaviors to organizational expectations and can clearly link their actions and organizational results.

 Rule 5: Increase reciprocity

This means “removing the buffers that make functions self-sufficient”. There is too much dysfunctional self sufficiency in organizations, largely fed by increased organizational layers and sub layers. Remove these unnecessary layers and interfaces which interfere with meaningful cooperation and we will encourage greater productivity. Above all, seek to design your organization in a way that creates interdependencies between functions so that only cooperation can deliver the required result.

Rule 6: Reward those who cooperate, blame those who don’t cooperate

Rather than promoting a culture that blames failure, we should promote a culture that rewards cooperation and blames non-cooperation. Morieux cites the CEO of Lego who believes  that “blame is not for failure, blame is for not helping or not asking for help“. This indeed changes everything because it encourages us to be transparent and to cooperate.

These 6 rules have profound consequences for organizational design, for finance policies, for human resource management in complex organizations. Above all, if we implement these 6 simple rules, we will manage complexity without being paralyzed by complicatedness. We will create more value at lower cost. We will simultaneously improve performance and job satisfaction because we will have removed the root cause that hinders both : “complicatedness“. This is the real challenge facing all leaders of complex organizations.

Why do so many companies die prematurely? 4 key factors

November 29, 2009

In his book “The Living Company” first published in 1997, a former senior executive of Shell, Arie de Geus, asked one simple question: why do so many companies die prematurely? A key contributor to business strategy at Shell, de Geus was investigating how to diversify the activities of Shell, knowing that its core business, petroleum,  in the long term would disappear. When he investigated what other companies were doing to ensure their long term future, he was startled to discover that there were few companies of the size of Shell who had the same or a longer lifespan.

The figures presented by de Geus on the subject of company longevity are indeed depressing. The average life expectancy of a multinational company  is between 40 & 50 years. One third of companies listed in the 1970 Fortune 500 had vanished by 1983. Human beings at least in the developed world now enjoy a life expectancy of 75 years and more yet companies have a mortality rate which is much higher. Indeed, if large companies can somehow hope to survive at least 40 to 50 years, this figure falls dramtically if you consider all companies big and small. De Geus quotes a study performed in Holland where the life expectancy of all firms investigated was calculated as 12,5 years!

The current crisis with the failures of institutions such as Lehmann Brothers (initially founded in 1853!) and the virtual bankruptcy of General Motors  makes the question of company mortality rates all the more relevant today.

When you consider all the social misery that such high levels of corporate mortality bring, it seems important to try to understand why so many companies fail and why some seem to survive despite all the political, social and economic upheavals around them. So why do so many companies fail? For de Geus, the reason is that their managers focus on the economic aspects of producing goods and services and they forget that their organization’s true nature is that of a community of humans!

Some companies nevertheless indeed last hundreds of years and de Geus gives examples such as DuPont, Kodak, Sumitomo, Mitsui and Daimaru. In France, Saint-Gobain has been around since 1665! So if you want to understand what is the secret to corporate longevity, study those large companies which have the longest lifespan to see what secrets they share.

De Geus identified 40 companies who were as large as Shell and older. After much analysis, he identified 4 key factors shared by all companies with a long lifespan:

  1. Longlived companies were sensitive to their environments and constantly adapted to societal changes around them.
  2. Long-lived companies were cohesive with a strong sense of identity. No matter how diversified they were, their employees felt they were all part of one single entity. It would appear that strong employee links is essential to survival in times of change.
  3. Longlived companies were tolerant and did not try to dominate or impose a centralized control throughout the organization.
  4. Longlived companies were conservative in financing, were frugal and did not risk their capital gratuitously. They managed cashflow wisely to maintain flexibility and independence.

What does this mean for managers running businesses who are fighting to deliver short-term results while guaranteeing the future?

De Geus defines the 4 factors in the following ways:

  1. sensitivity to the environment represents a company’s ability to learn and adapt
  2. cohesion and identity concerns a company’s ability to build a community and a persona for itself
  3. tolerance means the ability of an organization to build constructive relationships with other entities within and outside itself.
  4. conservative financing means the ability to govern its own growth and evolution effectively.

These 4 basic components: leaning to adapt, building a community with a shared purpose, building constructive relationships and being able to govern one own’s growth form a set of organizing principles of managerial behaviour and represent the critical aspects of the work of any manager who wants his or her company to survive and thrive for the long term.

But these 4 components can only flourish if we operate a paradigm shift and change the way we think of a company. For de Geus, a company is a living entity and not just a machine built to deliver products and services or satisfy customer or shareholders.

Anyone who has worked in a business would not be surprised with such a view of an organization. Organizations need to learn, all have an identity, all seek to guarantee their coherence, all build relationships with other entities and all grow and develop until they eventually die.

Considering a company as a living entity has important implications for answering another key question: what are companies for? According to the dominant paradigm in business, a company’s purpose is to deliver products and services, to serve customers and deliver ROI to shareholders.

De Geus anwers this question in a far more provocative way. A company, like all living entities, exists for its own survival and improvement : to fulfill its potential and to become as great as it can be. Just like a human being who doesn’t exist solely for his/her job or his/her career but seeks to survive and thrive, to realize his/her potential.

Profit, return on investment are a means to an end but not the end in itself. The end in itself for a company is simply to grow and thrive.

The implications of defining a company’s purpose in this way for managers and management practice are fundamental and far-reaching. If we accept that the purpose of a company is simply to survive and thrive, then the priorities in managing such a company are very different to those set forth by the champions of the dominant paradigm which sees a company’s purpose only as to deliver short term results.

Those companies with the longest life span would seem to have understood that their real purpose was to survive and thrive in the long term and they consequently managed their businesses around that goal.  In the present crisis, with so many companies going to the wall, it would be well worth rediscovering the views of Arie de Geus and investigating more deeply how we can benefit from the lessons and management best practices of the tercentenarian companies who put the sense of community first.

For more information, read Arie de Geus,  “The living company, Growth, learning and longevity in business“,  1997

arie de geus on organizational change


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