Four Groups

Archive for the ‘Culture’ Category

A recent post by Om Malik (here) sets about dissecting the recent departure of JC Penney CEO Ron Johnson after only two years in the job. Formerly the head of retail for Apple; clearly it was expected that he would be able to bring some of the Apple retail magic to JC Penney. Malik’s assertion that spectacular success is as much down to the collective efforts of groups and contextual factors as it is the ability of key individuals to drive things forward reminds me of Bill Taylor’s HBR article (here) questioning the emphasis organisations place on “superstars”. At the time Taylor’s article generated a huge (mostly negative) response. However, I’m starting to think that the unquestioning belief in the “we only hire the best” mantra is rapidly losing its allure.

The notion of the superstar is a beguiling one but unfortunately for corporate HR departments, it is an overly simplistic view. Surely, success has far much more to do with more complex variables such as; working environment, culture, relationships and other contextual factors than with the brilliance of a few key employees. As Boris Groysberg wrote (here) we really are fooling ourselves if we think that success can attributed to the abilities of talented individuals. In short, to transform any poorly performing group or organisation, requires far more than the parachuting in of someone with a great track record in a completely different environment.

Based on the recent comments from Stowe and Justin, the idea of a Physics of People is both valuable and represents something potentially unique. Given that the idea has the potential to transform business, the following post outlines the five criteria by which any transformation might take place.

A Starting Assumption

Although there is no shortage of models, assessments, psychometrics and techniques that help raise self awareness and provide insights, none offer predictions about people that are either regular or reliable enough to be used on a widespread basis.

The large number of tests, models and approaches is evidence of this. If a particular tool did provide useful and reliable predictions that improved understanding and decision making, then it’s usage and popularity would increase over time. Given that the vast majority of techniques and approaches have been on the market for 20 or 30 years plus, this is ample time for a consensus or market leader to have emerged with these qualities.

The other example that illustrates this assumption is the perception that HR doesn’t add value to the business. There is no shortage of commentary around this and in many cases, this line of reasoning has persisted since the Personnel Department was renamed Human Resources. The fact that HR can’t call on any widely used method or approach that offers reliable and actionable predictions and insights about people is probably one of the reason’s for this current perception of HR.

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Stowe Boyd is starting some interesting research into what he’s called Socialogy. Stowe defines Socialogy as “The theory and practice behind social business, its tools and techniques, and their impact on business culture, structure, operations, and people.”

From the piece:

I am going to be talking with a lot of researchers, visionaries, and practitioners who are working to push business into the 21st century, and to explore their ideas about moving onto a philosophy of business grounded in what we know about the human mind, social networks, and the emergent behaviors of connected groups.

In the series, I pose one question to my guests consistently: ‘How do you think a scientifically-grounded understanding of people as social beings will change business in the future and how?’

Incidently, Socialogy isn’t the first term that Stowe’s coined – he’s the originator of the term ‘hashtag‘ and also coined ‘social tools‘ back in 1999 so it will be interesting to see how this new term does.

Socialogy and the Potential to Transform Business

Given Stowe’s question, I thought I’d have a go at answering this from the perspective of Four Groups.

A scientifically-grounded understanding of people, such as 4G, has the potential to change business in hugely profound ways, perhaps on a scale comparable to the industrial revolution, the introduction of the PC or the rise of the internet.

Such a statement is naturally loaded with many assumptions and implications, so it’s worth exploring both in further detail.

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Over at HBR (here), Bill Taylor hits the nail on the head regarding the current obsession with innovation. Much like the focus on engagement a couple of years ago, innovation is the current area of focus. Business leaders have co-opted the phrase to launch a number of top down programmes focusing on championing innovation. The advent of the Chief Innovation Officer and innovation teams shows an element of misunderstanding of what is actually required.

Taylor argues that the problem is one of language, the overt use of the word innovation actually hides the fact that very little innovation is actually taking place. Whereas, the companies that really are truly innovative hardly ever, if at all describe what they do as innovative. Instead it comes from passion and purpose, a need to have innovation is a by-product of curiosity

Now, I’m all for leaders who want to ramp up the energy of their colleagues to take more chances and challenge conventional wisdom. But what strikes me about the organizations I’ve encountered that are genuinely innovative is that they rarely use the language of innovation to describe what they do or why they do it.

For me, this comes down to culture, if your organisation doesn’t have a culture of innovation it is almost impossible to artificially create.

A great post by Fred Wilson (here) looks at the role culture and fit play in growing companies. Rather than the quality of the products or services a company provides being the arbiter of performance, Wilson argues that it is the intangibles within the organisation that ultimately distinguish between success and failure. What do we mean when we talk about fit? Essentially it comes down to relationships, does person A provide a good fit for a team and will they be able to form strong, collaborative relationships with new colleagues, essentially strengthening the team. For those looking for a definition of culture, I’ve yet to find anything better than “It’s the way we do things round here”. I think that these aspects of organisational development are both hugely under appreciated by the majority, Fred Wilson does seem to be someone who appreciates the significance of behaviour, relationships and culture;

And the people side of the business is harder and way more complicated than building a product is. You have to start with culture, values, and a committment to creating a fantastic workplace. You can’t fake these things. They have to come from the top…If everyone is a mercenary and there is no shared culture and values, the team will blow apart. But if there is a meaningful culture that the entire team buys into, the team will stick together, double down, and get through those challenging situations.

As individuals and even from an organisational perspective we tend to fixate on what we can most easily influence and change, we are naturally drawn to the low hanging fruit, the activities that promise the most visible return for the least effort. With growing companies this leads to a focus on the tangible aspects of business development, ie products, systems and processes. It is no surprise that these complex, often hidden people problems tend to be swept under the carpet.

Even if you do get a handle on culture in the early stages, inevitably as the company grows this is likely to change and morph so what may have worked in one instance may not work in another. I think that many leaders get lulled into a false sense of security, particularly if they get detached from what is happening lower down the ranks and fail to grasp the ephemeral nature of culture. Unfortunately, by the time things start to go wrong, it is usually too late.

Luckily, Wilson’s view is becoming more mainstream and there are now tools such as 4G that are beginning to shed light on these very thorny problems and let both new and established companies get a more systematic grasp of both culture and fit.

A provocatively titled blog over at HBR (here) by Anthony J. Bradley and Mark P. McDonald questions the much used adage, “people are our greatest asset” (PAOGA from now on). The article raises some interesting points, bringing together ideas around staff engagement, emerging social media and culture. The authors argue that the means with which organisations empower their employees is the real driver of performance and should be the focus of corporate leaders rather than on individuals themselves. Amongst the key factors enabling this are; collective intelligence, emergent structures and relationship leverage. At the heart of these ideas is the assumption that organisations embrace social media and networking.

In their critique I think that the authors hit the nail on the head here;

Even great people are not your greatest asset. In fact, great people can be your greatest liability. If Enron wasn’t enough evidence of this, the 2008 financial crisis has now given us plenty more. What about Lehman Brothers, AIG and Countrywide? Arguably, these companies employed some of the smartest business people not only in the room but in the world, and yet those same folks took their firms to ruin (or near it) and came close to causing a collapse of the U.S. economy.

PAOGA fails to take into account many of the factors that affect performance and by itself it is a far too simplistic or mechanistic perspective. One of the great mistakes made by organisations is to treat individuals in isolation when it comes to development and reward. As the quote above states, seeking to hire the smartest people is no guarantee of success. Instead greater attention needs to be placed on the interactions between individual and above all the role culture plays on decision making.

The whole idea of likening individuals to other input mechanisms does a great disservice to the contribution people make both positive and negative. It also fails to take into consideration the exponential improvements to productivity and innovation that can be made if you get the magic combination of relationships and culture right. After all, if you treat your people as you do any other asset, you are severely limiting the discretionary effort that they are likely to put in.

A couple of articles dropped into the inbox last week that seem to confirm that despite decades of experience, organisations are still struggling to unlock the value in mergers and acquisitions. First up, a McKinsey survey (here), tells us that despite an uncertain economic outlook, M&A is still prominent in the minds of senior executives:

nearly half of the respondents expect their companies to explore more deals in the next 12 months than in the past 12, and small majorities expect them to start or complete at least as many, if not more.2 In addition, nearly half of the respondents report that their companies are looking outside the core business for new ways to grow.

No doubt, this is good news for nervous corporate financiers in investment banks worried about a diminishing bonus pool. However, shareholders and other stakeholders may not view this survey with quite as much relish. This is because within the survey there are clear indications that the ability and vision to successfully execute the basics is still lacking in even the largest companies:

The results also indicate that many companies still need to build critical capabilities, including integration planning, responding to cultural issues, and establishing standardized deal teams. That effort may well be complicated by a striking number of areas in which CFOs’ opinions differ from those of other C-level executives on topics as basic as which deals to do and what capabilities a company has.

The basic question this prompts is that with so much economic uncertainty, why would organisations appear to be so bullish to take risks on transactions that are notoriously variable in outcome? Personally, I think that this comes down to skewed perceptions. M&A is still seen to be a quick fix, an additive process. However, as with many things, people tend to oversimplify the complexities of each situation. Rather than two plus two equalling four, in many transactions two plus two has gone on to equal three, or even worse. In many ways these acquisitions are the ultimate example of the role of unintended consequences.

Clearly, a more subtle and nuanced approach to M&A is required. This has to do with having a greater understanding and appreciation of the intangible aspects of each transction. This requirement is highlighted over at Strategy + Business (here)  in an article by Barry Jaruzelski, Marian Mueller, and Peter Conway who list some great points about common fallacies and misconceptions about the way to manage the acquisition process. The broad theme of this is that organisations fail to appreciate that each deal is unique, requiring a tailored approach to the key factors. This combined with an overestimation of the organisation’s own capabilities reduces the chances of a successful outcome.

Whilst the mechanics of M&A are well understood, the existence of these articles and many others like them show that organisations still struggle with the more intangible side of transactions, namely the people and cultural issues. Maybe this blinkered approach has something to do with the people in charge of acquisitions? Arguably, the managers in charge of acquisitions are too keen to focus on what is certain and easily quantified. When looking at an acquisition the tendency to focus on the black and white numbers of the deal is a common error. This is touched on in the S+B article:

Many executives assume that if the financial arrangements are secure, the rest of the deal will follow. But all deals have two other significant factors to consider that are often not accounted for in the numbers: the human element and the need to develop the capabilities required to succeed in the new or merged business. This is especially important if the new business model is different from the company’s established model. A comprehensive due diligence process should take into account both the cultural and capability aspects of the deal.

This transactional viewpoint dramatically underestimates the complexity of M&A integration. Organisations by their nature are hugely complex, I’m not talking about the systems and processes that need integrating, this is complicated but not complex but the act of integrating two distinct organisations with different values, culture, behaviour and relationships. Unfortunately use of the standard organisational chart to understand the entity you are trying to integrate is a useless exercise in hubris. By looking beyond that which is most obvious acquirers need to understand the network, culture and relationships they are buying as well as the more tangible assets.  For example talent drain is a key issue with many acquisitions, yet it is simply not enough to look to identify the star performers or “talent” in the target company without an appreciation for the networks and context that enable these people to perform.

Acquisitions need a fresh pair of eyes and need to be driven by people with a different outlook. The fact that we are still seeing articles like the one at S+B is a clear indication of this. Instead of the traditional M&A leaders, the finance and operations people, how about letting acquisitions be managed or designed by people who understand and are comfortable with the language of complexity? This could include people from a variety of disparate fields such as network scientists, anthropologists, brand experts and psychologists. As well as limiting the downside of transactions, a more diverse approach would also increase the upside by helping understand the possibilities of greater integration and collaboration.

My previous post (here) commenting on Bill Taylor’s critique of the role of industry experience on decision making and innovation got me thinking about the systemic barriers to innovation that exist in many organisations. Taylor argues that by framing decision making on historical information, industry benchmarks and the actions of competitors, leaders are unwittingly cutting themselves off from a  deep pool of innovation. He also cites two good examples of organisations (here) that have broadened their scope to identify new approaches and innovation that were developed by examining unconnected industries.

In addition to being a problem of attitude and perspective amongst leaders, I would also argue that the systems and processes that organisations rely on for their day to day also hinder the development of new ideas and innovation. In other words an inability to innovate  is structural as well as psychological.

Take HR for example. HR is the ultimate experience counts function. In a desire to feed back to the business HR hoovers up all the tangible data it can, performance metrics, targets, KPI’s and benchmarks. However by trying to be seen as a valuable source of key organisational information and by extension a key sounding board, HR is doing itself a massive disservice. The result of this datacentric approach is that problems are viewed and decisions made within a highly restrictive framework. Taking this approach not only limits the possibilities of new ideas and innovation permeating the organisation, there is also little evidence that these measurements actually contribute to existing productivity.

Well, what can HR do? Allow me to take a moment to envisage what could be possible. To start, let’s follow Taylor’s advice and get people in to run HR who are not necessarily HR professionals. This would at least help provide some new perspective and as more and more of standard HR practice is either automated or outsourced an understanding of the mechanics of HR becomes less important.

Above all in order to address the systemic obstacles the new HR function needs to focus on the intangibles rather than the hard data approach currently used. HR needs to develop expertise around the idea of fit, the intersection of behaviour, relationships and culture. This clearly requires a radical change in outlook and to do this HR needs a detailed understanding of culture throughout the organisation, embrace social networks and become the disrupter in chief. Encourage cross fertilisation of ideas and move people between groups and functions. HR needs to act as the relationship architect within the organisation, not only identifying areas of potential collaboration but also helping line managers best manage and engage their teams.

Not to be too down on the HR department, it is important to state that HR is not to blame for the current situation, it merely reflects the underlying desire for certainty, predictability and simplicity of senior management, this attitude is deeply embedded in our organisations and their systems. In theory HR should be front and centre of the drive for increased innovation, however in order to achieve this a fundamental change is required in both attitude and systems.

Following on from yesterday’s post about leadership failure and the continued reliance on past experience as an indicator of leadership potential (here). The ever thought provoking Bill Taylor posted a blog (here) on HBR questioning the value or relevance of industry knowledge when it comes to innovation. Taylor argues that in many cases, deep knowledge or expertise of an industry can be an impediment to clear thinking and innovation.

the most effective leaders demonstrate a capacity for vuja dé. We’ve all experienced déjà vu — looking at an unfamiliar situation and feeling like you’ve seen it before. Vuja dé is the flip side of that — looking at a familiar situation (a field you’ve worked in for decades, products you’ve worked on for years) as if you’ve never seen it before, and, with that fresh line of sight, developing a distinctive point of view on the future. If you believe, as I do, that what you see shapes how you change, then the question for change-minded leaders becomes: How do you look at your organization and your field as if you are seeing them for the first time?

You can’t let what you know limit what you can imagine. As you try to do something special, exciting, important in your work, as you work hard to devise creative solutions to stubborn problems, don’t just look to other organizations in your field (or to your past successes) for ideas and practices. Look to great organizations in all sorts of unrelated fields to see what works for them — and how you can apply their ideas to your problems.

This makes a lot of sense, for example on a personal level when we go to someone for some specific advice, it is often with a view to understand the dangers or risks involved in a particular course of action i.e. a reason not to do something.  For organisations this calls into question many innovation programs that are driven from the top down. Innovation is not something that can be conjoured up from thin air within the constraint of existing beliefs and assumptions. The harsh reality for many organisations is that to be truly innovative you need to reject or turn your back on a comfortable and easily referenceable view of the world.

Above all, this approach requires a different mindset, one that is willing to challenge and question underlying assumptions and beliefs. To compound this difficulty, the higher up the corporate ladder you go the harder this becomes. Studies have shown that the more successful and senior we become, the more deeply embedded are our underlying beliefs and behaviours and that these are based on approaches that are successful. In other words thinking and behaviours that have delivered success in the past are the hardest ones to abandon or question. Furthermore, it is a natural trait to look to reference what is familiar and can be directly compared to our current circumstances. However, as the examples cited by Taylor attest, forcing oneself to challenge, question and confront basic assumptions and look beyond most obvious can help unlock the possibilities of true innovation.