Be More Like Mathematicians!

Posted on January 4, 2012 by Michael Folkman

Over at Boing Boing (here), Maggie Koerth-Baker points us in the direction of an interesting question posted on Quora (here), where someone asks "What is it like to have an understanding of very advanced mathematics?" In response, someone posted this enlightening response;

You are comfortable with feeling like you have no deep understanding of the problem you are studying. Indeed, when you do have a deep understanding, you have solved the problem and it is time to do something else. This makes the total time you spend in life reveling in your mastery of something quite brief. One of the main skills of research scientists of any type is knowing how to work comfortably and productively in a state of confusion.

For many of us, our natural inclination is to pull in the opposite direction and actively seek certainty and operate within a world of known parameters and possibilities. Arguably, forcing oneself to become more comfortable and willing to embrace uncertainty and the question the limits of ones understanding reprensents a major step in being able to look beyond the obvious. By acknowledging the complexity and deep interrelatedness of many issues facing organisations, new insight and dare I say it, greater innovation may be achievable. However, I suspect that for many managers who have spent a career trumpeting their experience and achievements, this is a step too far.

Posted in Uncategorized, Intangibles, Leadership | Tagged | Leave a comment

Greatest Assets?

Posted on December 9, 2011 by Michael Folkman

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.

Posted in Relationships, Culture, Intangibles, Teams | Tagged , , , , , , , , , | Leave a comment

The Value in Mentoring

Posted on December 9, 2011 by Michael Folkman

The rapid growth in the number of accelerator programs in the start-up world  brings the role of mentoring to the fore as a valuable tool for helping emerging entrepreneurs. With high profile programs such as Y Combinator, Techstars in the US and Springboard, Seedcamp, Startup Bootcamp, Oxygen and Mola amongst others in Europe. Following a similar model, start-ups are given office space cash and access to industry experts, in exchange for a small slice of equity. At the end of the three month program they then present to investors in the hope of securing further seed funding for their products.

Apart from hard cash, one of the key elements of the accelerator program offered to nascent companies is a mentoring. Mentors are usually sourced from a wide talent pool that includes individuals with practical experience in areas directly relevant to start-ups. This can include individuals experienced in; VC investment, PR, business development, finance and more experienced entrepreneurs. What is the value of this to young companies? At first glance, the top line benefits would appear to be the opportunity to tap into the mentor's experience and gain feedback and insight into the problems they are grappling with. Secondly, gaining access to the mentor's contacts book could also help open doors at a crucial stage. Both of these benefits would appear to be an invaluable opportunity for young companies.

However, I would argue that this access, whilst nice to have, will only have a limited impact on the long-term development and performance of young enterprises. In actual fact,  mentoring can be much more powerful and have a far more profound impact, however there is a caveat. Rather than dealing with the practical and specific day to day issues, the greatest upside potential in this situation is for the mentor to help the start-ups deal with and manage the huge amount of uncertainty they are dealing with. In other words rather than seeking specific answers to questions, the mentor can provide a far more valuable service by helping the start-ups figure out what are the right questions to ask.

Concentrating on asking the right questions, an ability to question ones own assumptions and dealing with inherent uncertainty is arguably far more valuable in the long-run than getting short term answers to questions and practical issues. The problem with seeking answers rather than questions is that despite their best intentions, mentors may not be able to provide optimal guidance based on their own experience. What may have worked for them in the past may not be the correct course of action for the entrepreneurs they are mentoring. This is especially true in the world of tech start-ups that accelerator programs inhabit.

The caveat to this approach is that this type of mentoring  requires a very specific relationship dynamic between mentor and mentee. Where a conducive dynamic does not exist, no amount of effort on the part or either mentor or start-up is going to result in a productive outcome. Where strong relationships underpin the mentoring process, it becomes less about the transfer of explicit knowledge and insight but instead far more subtle and potentially rewarding.

I would argue that it is far less important for mentors to have experience in an area that is perceived to be compatible or beneficial to a start-up than it is to have a relationship with strong learning and collaborative potential. This approach forces both parties to look beyond what is obvious and encourages a more considered approach based not on seeking answers to questions but figuring out what are the right questions to be asking, in this case it does not matter if the mentor has the answers or not. By taking the time to understand the way relationship dynamics will affect this process, it becomes possible to develop a program that offers far greater long-term potential to young entrepreneurs.

 

Posted in Teams, Technology, Relationships | Tagged , , , , , , , , , , | Leave a comment

M&A – Still Learning?

Posted on December 6, 2011 by Michael Folkman

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.

Posted in Uncategorized, Culture, Intangibles, Leadership, Teams, Relationships | Tagged , , , , , , , | Leave a comment

Systemic Barriers to Innovation

Posted on December 2, 2011 by Michael Folkman

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.

 

 

 

Posted in Uncategorized, Culture, Intangibles, Leadership | Tagged , , , , , | Leave a comment

Industry Experience not Required?

Posted on November 30, 2011 by Michael Folkman

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.

 

Posted in Culture, Leadership | Tagged , , , | 1 Comment

Leadership and Relationships – The Importance of Fit

Posted on November 29, 2011 by Michael Folkman

HRVendornews (here), highlights a new survey from Right Management and Chally Group that reports some interesting findings about the causes of corporate leadership failure. Among the more eye-catching figures are:

“Failure to build a team or relationships was singled out by the most (40%) survey respondents,” said Bram Lowsky, Executive Vice President of Right Management. “Second was mismatch for the corporate culture cited by 26%. Remarkably, not delivering acceptable results was named by just 11% of respondents as among the main three causes for failure”

This is all very interesting, not least because key drivers of leadership performance seem to be intangible factors rather than more quantifiable indicators of performance such as prior experience, education or aptitude and ability. Unfortunately for the majority of organisations, these seeming less valuable metrics are the ones that are most obvious or easiest to gather and have historically been given undue weight when making leadership decisions.

Maybe organisations could avoid the most damaging leadership mistakes by adopting a different approach? Moreover, perhaps the key to successful leadership development is not the identification of aptitude for certain tasks or responsibilities but a more open-ended and abstract idea about the role of "fit"? This would help explain one of the most perplexing problems of leadership, namely why some people are naturally able to achieve great things in one situation, whereas they cannot replicate that success in a different role or organisation. This brings to mind the fierce debate started by Bill Taylor over at HBR (here) about the value of corporate superstars. Maybe what these numbers are telling us is that it is better to have a leader that fits the organisation than it is to go out and hire an industry superstar?

Effective leadership, invariably involves situations where the leader is a good if not great fit with the underlying organisational culture. It is hard to argue that someone like Richard Branson would be as effective a corporate leader in an organisation that was inherently bureaucratic or risk averse. In other words great leadership is about the serendipitous confluence of personal characteristics and organisational context. In other words, the right person in the right place at the right time.

However, the report indicates that organisations still place significant emphasis on industry experience and track record.  This is borne out by the  numbers, with 73% of HR respondents citing track record as an indicator of leadership ability. However, I'd question this assumption. Is industry experience or track record a reliable indicator of performance in an unrelated or different role? Personally, I am sceptical. Of course leaders need to have credibility and ability, however beyond that I would argue that being able to develop strong and robust relationships with immediate colleagues and understand the culture that enables strategy to work with the culture is more important than in-depth industry knowledge or success in previous roles.

The fact that culture and relationships are intangible and highly complex inevitably leads to organisations focusing on more concrete or tangible. Why try to get to grips with the complex when there are easily available figures in black and white that everyone can understand? The good news for organisations is that with new tools and greater understanding of the intricacies of culture and relationships, it is now possible to place these key intangibles in a more systematic framework. Culture and relationships do not need to be implied but instead can be openly discussed and compared. There are now methods that can be used to take some of the guesswork or gut feel out of these big decisions. In fact organisations that want to get ahead should be looking at this issue in far greater breadth, the question of fit should not be confined to the upper echelons or the C-Suite, instead it should cascade down to all levels and inform the identification and selection of talent throughout. When making any decision about recruitment, promotion or team composition the question of "fit" should be uppermost in everyone's mind.

 

Posted in Culture, Intangibles, Leadership, Strategy, Teams, Relationships | Tagged , , , , , , , , | Leave a comment

Knowing When to Step Down – Dilemmas of Succession

Posted on November 23, 2011 by Michael Folkman

Succession is one of those topics that gets very little coverage given it's significance. An interesting blog post in the New York Times (here) by Quentin Hardy draws attention to some of the pitfalls in not having a plan in place as it discusses high profile tech founders who outstay their welcome and ultimately damage their organisations.

Above all, this article raises some interesting questions about leadership and culture in the organisation. The article features former Dell CEO Kevin Rollins who was ousted and replaced by the computer giant's eponymous founder makes some valid arguments about some of the unintentional damage founder/CEOs can do by hanging on in the top job for too long. These include stifling the next generation of leaders within the organisation and the unique power and influence that visionary tech founders are able to exercise on their organisations.

Visionaries are fantastic, but their companies are often notoriously hard to run. Sometimes, these leaders cling to dated visions and stifle innovation. And sometimes, they simply won’t get out of the way. Promising executives with new ideas get fed up and leave.

The unfortunate dichotomy facing the boards of tech companies is that to achieve great success in the first place you need someone with the vision and single-minded determination to impose their will on the organisation. Over time this results in the founder personifying the organisation's culture and values. However, this approach is rarely compatible more a more mature business or shifts in the competitive landscape. The result is that over time the behaviours that make a founder and organisation successful in the first place get ingrained in the organisational culture so much that change or an awareness of what new circumstances require is very hard to achieve. When things start to go wrong it becomes very difficult to know what to do if the tools that have served you so well in the past no longer seem to work.

Arguably, succession is not given the attention it requires because it is intangible and complex. This is because it is not just about having a plan in place. Succession is much more than a process that can be mapped out in the boardroom. Particularly for tech companies who often experience astonishing growth in a short period of time where the founders wield undue influence, the harsh truth is that in many cases succession is inextricably tied in with a necessary cultural shift in the organisation. A rejection of those values that make you successful is never an easy option.

 

 

 

Posted in Culture, General, Intangibles, Leadership, Uncategorized | Tagged , , , , , , , , | Leave a comment

Innovation and Culture

Posted on October 28, 2011 by Michael Folkman

Booz & Company’s Annual Innovation Survey (here) dropped into my inbox this morning and the conclusions are challenging and in many ways bad news for organisations striving to catch the elusive innovation wave.

The results suggest that it is not the amount of money spent on R+D that governs a company’s ability to innovate but something much more intangible and tricky to manipulate, organisational culture.

This is tough for business leaders as corporate culture is something that they as individuals have very little short-term influence over. Unfortunately a culture that encourages sustained meaningful innovation can’t be conjured out of thin air. Clearly, many executives are struggling to fully comprehend this and one of the biggest mistakes is the ongoing belief that strategic initiatives can kick-start innovation:

“Culture matters, enormously. Studies have shown again and again that there may be no more critical source of business success or failure than a company’s culture — it trumps strategy and leadership. That isn’t to say that strategy doesn’t matter, but rather that the particular strategy a company employs will succeed only if it is supported by the appropriate cultural attributes.”

The first mistake that many executives make is not having a firm grasp or understanding of the current organisational culture, without this knowledge, it is impossible to know what is and what is not possible in terms of short-term cultural change:

“The larger lesson for companies that struggle to convert their R&D expenditures into successful products, solid financial returns, and unassailable market positions is that it may not just be traditional factors like the innovation pipeline that need rethinking. Instead, companies should follow the lead of the most successful innovators in ensuring that the company’s culture not only supports innovation, but actually accelerates its execution.”

Clearly, achieving this is much easier said than done, and for many organisations the existing corporate culture may be so far away from one that actively promotes and encourages innovation that a truly innovative culture is impossible to achieve in the medium term. All is not lost however, as inevitably within the organisation there will be sub-cultures within certain department or groups that are more amenable or open to fostering innovation. Again, understanding the existing culture and where these groups exist is key to long-term change.

Once the existing culture and its constraints are understood, executives need to ask themselves whether they really want innovation? This may seem like a no-brainer but a culture of innovation is unlikely to be plain sailing. Many pay lip service to this but for most executives it means facing up to uncomfortable truths. This entails not just an evolution of organisational culture, itself something difficult to achieve but also on a personal level and the behaviours that has made them successful in the first place.

This argument was echoed in a blog posting by Saul Kaplan over at HBR in this piece (here) where he highlights the reluctant executive as a key impediment to innovation:

“The most obvious reason companies fail at business model innovation is because CEOs and their senior leadership teams don't want to explore new business models. They are content with the current one and want everyone in the organization focused on how to improve its performance.”

This inertia also extends to an unwillingness to embrace new business lines or ideas that may cannibalise existing product lines:

“When executives look at new opportunities they see them through the lens of the current business model and view them as competing with the current way the organization creates, delivers, and captures value. Organizations fail at business model innovation because they blindly take cannibalization off the table even if a new business model may have significant upside potential.”

This gets to the heart of the problem, culture within organisations is myriad and many have a hard time understanding this.

A pre-requisite for moving up the corporate ladder should be a willingness to challenge and question what makes you successful. In reality exactly the opposite is in action in most organisations as norms that focus on preserving the status quo are perpetuated. This is touched on in Saul Kaplan’s final obstacle to innovation.

“Business model innovators go against the corporate grain. They see entirely new ways to create, deliver, and capture value. If those that are tasked with sustaining and growing today's business models are allowed to reject those with the perspective and insight to help design the next one, business model innovation efforts will fail.”

The importance of aligning strategy and culture has never been more apparent. However, organisations must learn that before they run they must learn to walk, this means making the effort to understand the underlying cultures within the organisation and the constraints that these place on the ability to innovate and change. Only then can decisions be taken as to how best achieve this.

Posted in Uncategorized, Culture, Intangibles, Leadership, Strategy | Tagged , , , , , , , , , , , | Leave a comment

A Problem with Complexity

Posted on September 21, 2011 by Michael Folkman

If engagement was the buzzword amongst OD and HR professionals last year, the current word du jour seems to be complexity.

HR Magazine recently (here) featured research carried out by Simon Collinson at Warwick University and consultancy Simplicity Partnership that came to the conclusion that the world’s largest 200 companies are foregoing on average £735m ($1.2bn) of profit annually, because they have over time engineered far too much complexity into their organisational structures.

Whilst I am not sure how this figure was arrived at, this makes a certain amount of intuitive sense, especially as history has shown us that as organisations grow, individual productivity tends to fall. As we are dealing with the largest companies, it stands to reason that a huge amount of time and effort is wasted on inefficient and superfluous activities.

Indeed it is not just time and productivity that is lost within the convoluted and complex structures in the largest companies. Over-complex organisational structure also discourages innovation as Steven Johnson discussed in his recent book Where Good Ideas Come From (here), arguing that a more organic approach to organisational structure such as that found in cities can lead to greater innovation.

The authors of the report state that the current situation is down to employees over-engineering systems and processes, incrementally adding steps or actions that in reality add little to the business and reduce the amount of time people can devote to more productive activities. Over time this has a huge cumulative effect on performance. They go on to conclude that in order to increase productivity and profits, it is necessary for organisations to simplify their structures and strategies, paring them back to more easily manageable levels that actually encourage greater output rather than hindering it.

Without doubt this approach could help free up considerable management and employee time that could be devoted to more productive activities. However, personally, I think that this approach does not necessarily lead to a long-term solution to this problem. Without significant changes in how we think and approach organisational design, strategy and culture, it is inevitable that despite the best efforts to simplify and control systems and processes, over time they will revert back to an inefficient state.

Interestingly, the article is entitled; “$1.2 billion each: The hidden cost of people complexity to the top 200”, note the emphasis on the word people. From my perspective the real root of these problems are down to behaviour. This problem is as much about relationships, behaviour and culture as it is systems and processes.

The complex and inefficient systems that riddle our largest organisations stem from the very human desire to simplify, unify and control naturally complex issues. Our innate desire to manage and understand the environment around us leads us to try and measure information in the most basic and simple terms. How else do you explain the cult of metrics in the business? The great mistake is that in the real world and particularly for large systems such as multinational organisations we cannot fully understand the huge amount of variables and cause and effect relationships that permeate throughout the system, instead we have a rudimentary set of measurements that although designed to reduce uncertainty, we can never be sure that are telling us what we think they are or leading to

Secondly, it can be argued that the system actually encourages inefficient behaviour. As managers work their way up the corporate ladder, in many cases they are rewarded for the inefficient behaviour that perpetuates the bureaucratic and inefficient. For instance, activities such as standardisation, predictability and reducing variability are all actively encouraged ye Such rewards and positive feedback become lodged in our minds that any change in this outlook becomes hard to achieve. For instance getting managers to actively look to cede or give up control rather than seek more of it is a necessary step if organisations are going to benefit from increased efficiency, yet this is much easier said than done.

To solve the problem of complexity we need to understand that the methods that have traditionally been used to construct and organise businesses are inherently inefficient and in many cases stifle growth and inefficiency. Unfortunately for organisations the long-term solution requires a re-engineering of attitudes and behaviour.

 

Posted in Uncategorized | Tagged , , , , , , , , , , , , , , , | Comments Off on A Problem with Complexity