Relationships Matter (more than ever)

In his 1994 book Job Shift, William Bridges refers to the “job” as “an artifact of the industrial revolution”. The traditional organisation is designed to function like a machine. It is a hierarchy with jobs as the building blocks. In this model people are essentially cogs in the wheel of production. This model, and the leadership style of command and control it refined and has historically rewarded, is no longer sufficient for today’s organisations to thrive. We know this intuitively.

Many of us have had to invent ways to work that are often unsupported or even thwarted by the confines of the structure we are in and the remnants of command and control leadership style and practices it encourages.

Yet for better or for worse, this model is not going away anytime soon.

The hierarchy continues to represent what organisations looks like. From an individual perspective the construct of a “job” also continues to be very important. It tells us how we fit and helps to clarify what is expected of us in exchange for a paycheck. As we move up the boxes on the hierarchy it represents power, authority, achievement, and the promise of increased financial reward.

There is a significant flaw in this model that provides a clue to what is needed from leaders now and into the future.

The traditional model of organisations, including the thinking and assumptions that underlie it, ignores the extent of our interdependence. Leaders now and into the future can no longer afford to ignore this reality in style or practice.

Most work in today’s world gets done through a multitude of transactions conducted between individuals and rarely follows the neat path of organisational lines. Even the notion of organisational lines is blurring as collaboration across businesses, becomes more prevalent and the rapidly growing ranks of the self-employed create a kind of free agency workforce.

The command and control style of leadership may have ensured the order and efficiency essential to success in the industrial age. Yet in today’s world it all too easily causes the hierarchical model to devolve into the kind of bureaucracy we can no longer afford and are less and less willing to tolerate.

The world of work is far too complex and rapidly changing to continue to relate to the definition of our jobs in the simplistic terms of what we do. And the construct of setting individual objectives that are expected to somehow “roll up” into organisational objectives is no longer sufficient to ensure we succeed together.

We must all begin to think about our jobs in terms of what we promise, not just in terms of the things we must do, but also in terms of the promises we must make to others to produce results.

It is that network of promises, both in terms of organisational goals as well as the everyday fabric of our promises to each other, which interconnect our actions and ensures our shared goals are ultimately achieved.

A job description will never be able to capture everything we need to do to get the job done. And an org chart is not designed to reflect our interdependence. We don’t need to ditch the org chart. But positional leaders do need to make an essential shift from focusing on the relationship between jobs to fortifying the relationships between people.

Because the building block of organisations of the future is no longer the job. It is relationships.

The hierarchical model inherently keeps our focus on people as the boxes in an org chart and keeps our attention on what separates us. This undermines our relationships, unwittingly keeping the destructive dynamic of “us” vs. “them” intact. It is far too easy to retreat into our “box” when something isn’t working, justifying ourselves with “It’s not my job” or “I did my part, but someone else didn’t do theirs” so it’s not my responsibility.

To be effective now and in the future leaders must instead foster a culture of accountability, shifting everyone’s focus to clarifying and fortifying their inter-dependencies in terms of their commitments to each other.

The job may or may not become an artifact as Bridges predicted, but those organisations whose leaders fail to change the way they relate to them may find themselves on the brink of extinction.

Trevor Lee

tblee@pm.me

Cell +44 7979 882992

No more Command and Control. Please!

In order to power growth you should aim for an adaptive and empowered organisation, that:

• Responds rapidly to threats and opportunities.

• Adaptive organisations operate with speed and simplicity by giving managers the scope to act immediately and decisively within clear values and strategic boundaries. Making strategy an open, continuous and adaptive process is the key. It enables the firm to react to emerging threats and opportunities as they arise rather than being constrained by a fixed and outdated plan.
  

• Attracts and keeps the best people.

• It is no coincidence that Adaptive Organisations such as Google, Handelsbanken and W.L. Gore regularly appear in the lists of “best companies to work for”. The reasons are obvious. From the employee perspective, talented people want to learn and develop; they value time to think, reflect and try new ideas; they want decision-making responsibility and they want a friendly, collegiate culture. From the employer perspective, they want people who have the right attitude, have ideas and can add value, want to participate in decision-making, are good team players and have the talent to become leaders at any level.
  

• Enables and encourages continuous innovation.

• Innovation is about thinking and acting differently whether it is about strategies, business models, processes, or management practices. In adaptive organisations, people work within an open and self-questioning environment. Clear governance principles set the right climate and builds the mutual trust needed to share knowledge and best practices. This is also encouraged by the move away from individual rewards based on budgets and toward team rewards based on business unit or group performance.
  

• Drives operational excellence.

• Adaptive organisations have lower costs. Not only do they connect the work that people do with customer needs, but they also align products, processes, projects, and structures with their strategy. Operating managers also challenge resources used rather than seeing them as ‘entitlements’. Just asking the question, “Does it add value to the customer?” is often sufficient to ensure that unnecessary work is eliminated.
  

• Leads to loyal and profitable customers.

• Adaptive organizations know how customers want to conduct business with them. Key issues are whether customers just want the lowest-cost transaction, added-value services, or customised solutions. Under this “outside-in” approach, firms know how to satisfy customers’ needs profitably. This means not only knowing their needs, but also their net profitability.
  

• Support good governance and ethical behaviour.

• Adaptive organisations are held together by strong values and inviolate principles. However, it is not a soft option. It exposes non-performers. It challenges people all the time. You cannot just agree on a number. You have to show people that you can actually achieve real performance improvements, and must always be prepared to be judged against others with similar problems and opportunities.

• Leads to sustained value creation.

• Leaders in Adaptive organisations focus their attention (either explicitly or implicitly) on creating wealth over the longer term. In particular, they focus on setting high performance expectations and stretching people’s ambitions. Those companies that operate this way tend to beat the competition not just this quarter or this year but year after year.

Clearly adapting in these ways the organisation that will emerge will replace the 20th century industrial age command and control management model that is no longer ‘fit for purpose’.

A viable alternative* that will provide a sustainable basis for high performance.

*BBRT.ORG will assist you on this journey as it has done alongside so many leading organisations (see website)

Trevor Lee

https://www.linkedin.com/in/trevorblee/

tblee@pm.me

Cell +44 7979 882992

 

Decoding Intuition for More Effective Decision-Making in 2020

It turns out that intuition is not really intuition at all.

Just like the invisible, inseparable quarks that underlie the protons and neutrons in the nucleus, rules of thumb (ROTs) are the fundamental, sometimes invisible, particles of CEO decision-making. They are the building blocks that underlie what CEOs describe as “intuition” or “gut feel.”

Ask an experienced CEO how she/he made a major decision and their typical response is “intuition” or “gut feel.” Yes, analysis also plays a role, but intuition was found to be a major or determining factor in 85% of thirty-six major CEO decisions that we studied.

Some were good decisions, some were not, but regardless, intuition seemed to always rule the roost.

 

But what is it?

After persistent and deft questioning, CEO’s will identify, sometimes to their surprise, judgmental heuristics — ROTs — that go a long way towards explaining their major decisions. It is these building blocks that we must examine in order to discriminate between “good” and “bad” intuition.

After CEOs identify a few ROTs, a torrent of supplementary ones often follows. Some CEOs argued, however, that they use values for guidance, not ROTs. But values alone don’t provide clear guidelines. Only when they are operationalized into ROTs do they serve as decision-making tools.

At Odebrecht S.A., a large ($22B) Brazilian conglomerate, the CEO and founder’s grandson, Marcelo Odebrecht and the rest of the company’s leadership are dedicated to upholding the company’s core values: trust and partnership. But when it came down to actual decision-making it became clear, after considerable probing, that the company operated with four basic ROTs derived from these overarching values and passed down from generation to generation of Odebrechts:

1. Decentralize operations
2. Decentralize strategy
3. Promote only from within
4. Partner with your customer

These ROTs guided CEO Marcelo Odebrecht when, despite serious misgivings, he decided to support his Brazil Director’s call to take over the construction of the Pan American Games facilities in Rio de Janeiro from another contractor. Marcelo did not interfere in his Director’s decision because of his commitment to his ROTs (#1 and #2) and because the director was a long-term employee who had “drank the Odebrecht Kool Aid” (ROT #3).

Business leaders ignore their intuition at their own peril. When Gustavo Cisneros, the CEO of the Cisneros Group, was considering a 50/50 partnership with AOL to establish AOL Latin America, his board, his family and his management team were united in endorsing the deal.

On the other hand, Cisneros had a gnawing feeling that Latin Americans were different from U.S. customers, and they would not pay a subscription fee to use the internet. But because everyone, including AOL’s intense and charismatic leaders — Steve Case and Bob Pitman — saw it as a great deal, Gustavo sublimated his intuition. Five years later, after a bankruptcy filing and nearly a billion dollars in accumulated losses, Gustavo regrets not having paid more attention to his “intuition.” Now Gustavo has a new ROT: “Never make a deal if it doesn’t feel right with your intuition.”

Bill Amelio, former President and CEO of Lenovo, learned the same lesson, even though he’d deliberately produced his own set of personalized rules of thumb, after taking on the challenge of merging Legend Computer and the IBM PC division into what we now know as Lenovo.

Here’s Bill’s list (amended following the merger, as described below):

Strategy:

1. Identify and concentrate on the critical few decisions.
2. A call is better than no call.
3. Give your decisions a short leash. Quickly pull back in case of mistake.
4. Trust your intuition.

People:
1. Communicate the critical few decisions effectively and repeatedly.
2. Don’t tolerate jerks.
3. Build a team of people you can trust and rely on.
4. Trust your intuition.

Self:
1. Get feedback early and often and act on this feedback.
2. Earn the trust and confidence of others.
3. Demonstrate vulnerability to gain credibility.
4. Play to your strengths.
5. Trust your intuition.

To build a new management team he could rely on (ROT — People #3), Amelio demoted a man who had contributed much to the development of Legend, someone the Chinese refer to as a “made man.” Bill went through the right process and got his Chinese Chairman to sign off. But he ignored his intuition and the body language of the Chairman when he responded cryptically that as CEO he had “full authority to decide.”
The result was a major debacle in which Bill was faulted for ignoring the values of Chinese culture and caused a significant loss of trust. Amelio consequently added “Trust your intuition” (ROT — Self #5) to his rules.

Discovering, and continuously updating, rules of thumb is an important task for every CEO. It is a fundamental element of self awareness. Yes, values and beliefs are important, but it is really ROTs that operationalize and bring down to earth what really guides CEO decision-making. These rules can then be identified, challenged and adapted as circumstances change.

 

Trevor Lee

https://www.linkedin.com/in/trevorblee/

tblee@pm.me

Cell +44 7979 882992

The Epitaph of Managerialism

In today’s guest post Dr Jules Goddard, Fellow of the LBS reminds us that reducing costs is only a means to an end, not a strategy.

He goes on to say …

The art of management is to manage a business in such a way that the need for operational excellence, continuous improvement, “right first time”, cost leadership, process redesign, corporate renewal, cultural change, charismatic leadership, employee engagement and financial incentives is redundant; and the declared pursuit of these objectives counts as a clear admission of failure.

When executives reach for these remedies, you can be sure that the business has been woefully mismanaged and failure cannot be far away. There are no surer signs of the inadequacy and delinquency of corporate leadership than that (1) cost efficiency should be extolled as the dominant issue facing the company, and (2) the tactics of outsourcing, shared services, restructuring and other short-term palliatives are being paraded as the main drivers of profitability.

“You don’t make yogurt; you make the conditions and the yogurt makes itself.” Like that wise saying, you don’t manage costs; you design the business strategy and the strategy establishes the necessary cost base.

Costs are an outcome of the strategy, not the goal of the strategy. Cost efficiency is always relative to a strategy or to a business model, never to a competitor or to an absolute standard or benchmark.

One step ahead
Strategy is, therefore, the skill of staying one step ahead of the need to be efficient. As soon as the firm starts to attract competitors and pressures on cost start to be felt, a winning strategy will already have been invented to ensure that the business is moving into a new, distinctive and unassailable market position in which its quasimonopolistic power enables it to be a price maker, not a price taker or cost cutter.

The true test of the innovative capability of a firm is that it never needs to worry about, let alone wrestle with, the cost competitiveness of its business model. Its creativity and courage are of such a quality that they immunise the firm against ever having to resort to such mundane and mind-sapping activities as cost reduction, business reorganisation, zero-based budgeting or change management. The job of accounting is to keep the firm honest to this purpose. Financial accounts should be designed primarily to pick up signs of commoditisation at the earliest possible stage, before strategic damage is done, by detecting any backsliding to policies such as taking cost out, downsizing, restructuring, outsourcing or, indeed, any other management fad that serves only to damage the firm’s strategy.

Time spent on strategies of cost efficiency is time stolen from the much more important and wealth-creative activities of innovation, differentiation and entrepreneurship.

A poor management sees its job as “re-profiling the human capital” to fit the needs of its strategy. If the strategy is stunted and unimaginative, then a proportion of the workforce will inevitably be made redundant. This goes by the euphemism of “headcount reduction”. A gifted management takes the talents of everyone in the organisation as a given and pits its imagination against the challenge of inventing a strategy that makes maximum use of everyone’s capabilities It is questionable whether management has the right to cut the workforce to suit its strategy; its moral legitimacy depends upon its ability to find market opportunities whose capture depends upon applying the talents of the entire workforce.

Indeed, this is the central responsibility of senior management. If it cannot do this (if its only strategy is to cut costs), then it should step down and give other management teams the chance to do so. Put another way, the top management team should start its cost-cutting drive with itself.

Endgame?
“Managerialism” is steeped in an instrumental ethic in which employees are called “human resources” or “human capital” and are treated as factors of production or the agents of stakeholders. Kant’s categorical imperative warns us against treating other people as means rather than ends. In many firms, the prevailing model of management, with its fixation on control, coordination and compliance, has effectively institutionalised the instrumental treatment of other people. Managers typically get to a better result by thinking of the organisation as the means to the fulfilment and betterment of individuals than as an end in itself.

The lead indicators of  strategic failure are typically three:

(1) the notion of “best practice” creeps into the management lexicon,

(2) the practice of bench-marking the performance of competitors takes hold and

(3) business managers are set targets to match or exceed the bench-marked performance of key competitors through the implementation of best practice.

Most firms that go bankrupt are paragons of this style of management. Over the 40 years that GM gradually moved towards Chapter 11, there wasn’t a single quarter in which management missed its cost-reduction targets.

Since 1970, when GM first chose Toyota as its benchmark, its remorseless and unwavering pursuit of operational excellence, cost leadership, world-class manufacturing and best practice never faltered. Eventually this mindset drove the business bankrupt – as cost-reduction strategies nearly always do, eventually. The story of GM could serve as the epitaph of managerialism.

Dr Jules Goddard, formerly Gresham Professor of Commerce at City University, is currently Fellow at the Centre for Management Development, London Business School

Trevor Lee

https://www.linkedin.com/in/trevorblee/

tblee@pm.me

Cell +44 7979 882992