Six Simple Rules (book by Morieaux & Tollman)

Six Simple Rules

Y. Morieux & P. Tollman

Six Simple Rules

The premise of this book is that the hard (Theory X) and soft (Theory Y) approaches to management are no longer suitable in our increasingly complex business climate. The hard approach tries to manage complexity by controlling employees through policies, incentives and structures. This creates inflexibility, “complicatedness” and waste. The hard approach also assumes that people are the problem and need to be controlled. The soft approach assumes that people are the solution and simply need to develop the mindsets to obtain the desired outcomes. Managers often blend the two approaches by setting clear roles, structures and objectives while also spending time listening, hosting team building exercises, and encouraging engagement. In the end, the authors point out that these are just two different approaches to controlling employees in order to obtain the desired results.

This might have worked in the past, but is inadequate today. In our experience, complexity can only be addressed by people using their judgment in the moment. People’s autonomy is therefore essential to deal with complexity*. Because nobody is able to solve all the problems by themselves, cooperation is required. The authors propose six rules to replace the hard and soft approaches.

1. Understand what your people do.
2. Reinforce integrators.
3. Increase the total quantity of power.
4. Increase reciprocity
5. Extend the shadow of the future
6. Reward those who cooperate.

At the root of the problem is a changing business climate. One symptom of this change is the increased number of performance requirements that a company tracks. While 10-20 years ago a company might track 4-7 things, today it is common for companies to track 25-40. Some of these requirements are contradictory and fluid. Companies attempt to apply best practices, better metrics and better people practices without success and end up with companies that are very complicated to operate. The authors use a “complexity index” to track procedures, approval levels, coordinator roles, and scorecards used by companies; over the last 55 years, these have increased 35-fold. Notice that a 6-fold increase in corporate requirements led to a 35-fold increase in complication.

In the most complicated companies, managers spend 40-60% of their time working on work. Much of this work is “wasted” in the sense that it does not create value for the customer or shareholder. One example of such work-on-work is the appointment of special roles like innovation czar, the risk management team, the compliance unit, the customer-centricity leader, Mr. Quality-in-Chief, and the cohort of coordinators and interfaces that have become so common in companies. The problem affects both large and small companies. Employees work hard at these tasks, but know that they are not value- added. This complication has consequences; in the top quintile of complicated companies, employees are 3-times more likely to be disengaged.

Many people think that complexity is the problem itself, but the authors suggest an alternative view. The complexity is a challenge for companies, but it also represents a significant opportunity. A company that can agilely respond to the needs of its customers will create a sustained competitive advantage. The real curse is not complexity so much as “complicatedness”, by which we mean the proliferation of cumbersome organizational mechanisms – structures, procedures, rules, and roles – that companies put into place….complicatedness is a curse, it is not the root cause of the problem; it is…only a by-product of outdated, ineffectual and irrelevant management thinking and practices.

Complexity on the outside leads to complication on the inside of companies. Hard approaches through more controls, structures and policies are no more effective than a more humanistic approach. In our experience, complexity can only be addressed by people using their judgment in the moment. People’s autonomy is therefore essential to deal with complexity. This is the foundational thought for the first three rules proposed in this book. It is also the nature of complexity that no one individual has the entire answer. So it is equally necessary that people use their autonomy to cooperate with each other. This is the foundation of the last three rules proposed in this book. It may seem that directly eliminating complication would solve that problem, but that is naïve. The complication is a way to cope with complexity that is real. The book advocates that autonomy and cooperation are a better answer.

The proliferation of metrics and incentives of the hard approach not only adds to complicatedness but actually obstructs the kind of cooperation necessary to deal with business complexity. These two characteristics – autonomy and cooperation – are precisely what the hard approach seeks to eliminate….the soft approach…negates people’s autonomy in their intelligence because it views individuals decisions and actions as Pavlovian responses to psychological needs and emotional stimuli (just as the hard approach views these decisions and actions as Pavlovian responses to financial stimuli).

Though the following rules are called simple - that does not mean they are easy to use. They require different patterns of thinking and working. And they have a scientific basis. The rules have their origins in work by Herbert Simon (Nobel prize, 1978) on decision making and Thomas Schelling (Nobel prize, 2005) on game theory regarding conflict and cooperation. Here are some of these perspectives.

• Human behavior is strategic. People adapt to their environment strategically (in the sense that game theory uses the term) in order to fulfill certain objectives or goals.
• Formal rules and procedures don’t have predetermined effect on people’s behavior. Rather, people actively interpret rules and use them as a resource to fulfill their goals.
• Cooperation isn’t just some taken-for-granted value or goal (the desire that people “work together as a team”). It is a complex social process, hard to create and easy to destroy.
• Power isn’t a necessary evil or source of coercion. It is a critical resource for the individual in organizations and for mobilizing collective action.

Simple Rule One: Understand what your people do

Managers may not understand what their people actually do. The higher in the structure these managers are, the less understanding they have. Managers are unaware of the barriers and complications employees face in doing their work. When managers don’t understand what people really do, they don’t understand why the organization is performing (or not performing) the way it is. This lack of understanding helps explain why, when managers embark on performance-improvement initiatives, they often prescribe solutions that not only fail to improve performance but also add to organizational complicatedness.

Step one of understanding the work is understanding the context of the work. Goals, resources and constraints create the context. People’s behaviors are the ways that people try to deal with their problems, achieve their goals while working with the resources and constraints they have available. It helps to think of these behaviors as strategies that rationally utilize the resources and constraints. An interesting observation made by the authors is that all the organizational mechanisms…that managers typically think drive performance are really only resources or constraints that employees will use or try to sidestep to achieve their goals. The relationship between goals, resources and constraints is not as obvious as it may seem. In particular, resources and constraints may be interchangeable.

Goals are more straightforward. Goals are the desired outcomes and often the stakes that the people have in that outcome. While it is easy to imagine that the goals of employees are the organizational goals, most people have very near-term goals that relate to getting through the next few days’ or weeks’. At this scale, people may struggle to articulate their goals or may wish to keep their goals secret (and there are many legitimate reasons for this). But examination of what people say and do, in combination with formal goals, can reveal their larger goals.

Resources are what people use to solve their problems….typical resources include an individual’s skills…the cooperation of colleagues…information…and power….What some people perceive as a resource, others can perceive as a constraint.

 

Constraints are things that people try to avoid, minimize or sidestep….A person’s constraints may include things such as performance targets, specific organizational rules, lack of room for maneuver….Like resources, they are neither good nor bad in themselves. All organizations impose constraints. In some situations, constraints are actually resources that help people achieve their goals.

Because people work together, any group of people has a mix of goals, resources and constraints that interact to create interdependencies. These interdependencies create a need for cooperation. But cooperation can be difficult. Cooperation between individuals with distinct responsibilities, resources and constraints always involves what we call adjustment costs. For one person to cooperate with another to help them achieve their goals, they must use some of their own resources to fulfill the other’s goals. Often each person “sacrifices” compared to their ideal. Importantly, even if both people share in the gain, that does not change the fact that there are adjustment costs that may make reaching individual goals harder. Adjustment costs are a potential source of dysfunction and disengagement when the adjustment costs are unevenly distributed. Signs of adjustment costs include stress, dissatisfaction, resentment of people who take help but do not give it, and indifference to the needs of others.

To really understand how people work, good clues often come from anomalies; discontinuities between how they describe problems and how they act on those problems. This may indicate that what seems like a constraint is actually a resource - or the reverse. The book provides the example of managers who complain about administrative tasks, but spend their time on them because that allows them to avoid facing their lack of power to influence the work of their subordinates. What seems like a constraint is actually a resource for those managers. A resource is what people use. If people don’t use something, then it’s not a resource but, rather, it must be a constraint for them….People adjust their goals to the available resources as much as they try to adjust resources to meet a goal.

In an organizational context, cooperation allows people to access additional resources to meet a goal. This imposes an adjustment cost and so cooperation may be withheld. When people avoid cooperation and externalize the adjustment costs to third parties, it is always at the expense of the organization. The book provides the example of hotel clerks who needed, but did not get help from housekeeping. The adjustment cost was transferred to guests – who then chose to stay elsewhere because of “rude” clerks. The core problem was not rudeness, but lack of time for clerks to serve customers because they were hurrying to find clean rooms for arriving customers – and that involved trips to rooms to check if they were clean. When diagnosing problems like “rude clerks”, it is common to pay attention to what people are not doing (being polite) rather than what they are doing (scrambling to find clean rooms). What they are doing is the rational strategy to use their resources to obtain their goals. After all, people do not spend their days not cross-selling, not deciding, not innovating. They do things – what and why? We do not focus on what people do, but on what they don’t do. Therefore we can’t understand why they do what they do. A focus on failure leads to diagnoses like “we do not innovate because we don’t have innovation processes”. The response is to create an innovation strategy with defined processes, metrics and roles. Those processes and roles are a cause of complicatedness.

The authors also comment that organizations achieve much of their success from the organizational elements that are already in use, so simply dismantling these structures may have no effects. It is hard to predict what elements interact with people in what situation. It may also be useless to try to determine the organizational structure based on its key processes. It is only by considering the work context, and their effect in this context, that organizational elements can be appropriately analyzed and designed. The effect of organizational elements on behaviors, thus performance, depends on how people deal with these elements as resources or constraints. Because all initiatives create resources and constraints, they always have impact. However, it is wrong to think that useless initiatives have no effect. They damage work by requiring people to respond to them.

The previous paragraphs have mostly focused on the hard approach. The soft approach has a different set of dynamics. For example, managers often assume that trust is a prerequisite to cooperation. They take steps to build trust. Actually, trust goes the other way. People develop trust by working together. Their partially pooled resources and constraints help achieve their goals and as they experience reciprocity, they develop trust. By extending help to another, a person exercises autonomy (you can’t really make someone help someone else). Taking into account people’s autonomy matters precisely because behaviors are intelligent…ways to adjust to a context, rather than the automatic and passive implementation of…predefined responses….sometimes managers do pay attention to people’s behavior. We hear executives say, “We’ve created a new organizational structure, but in order for it to deliver, people need to behave differently.” Perspectives like this are probably the most pernicious of all. The authors say that behavior is a consequence of structure and context. If the structure and context are in conflict, then people will struggle with the structure and adopt behaviors that may have unanticipated consequences. Thus creating a structure without understanding the work may not obtain the desired result.

Simple Rule Two: Reinforce integrators

Integrators foster cooperation. They are distinct from coordinators or facilitators because they do not represent a formal role, position or structure. They are not a part of the bureaucracy or administration, and they do not help navigate a matrix structure. An integrator helps make people cooperate, so they not only are connected, but they have an ability to induce or force cooperation. Many people who are described as “connected” within an organization, but not through their formal role, are acting as integrators.

Organizations are literally swamped with dedicated roles designed to help different parts of the organization work better with each other: coordinators, cross-functional committees, interface groups, overlays and the like. These roles and functions are the exact opposite of what we mean by integrators because…they are not very effective…and they contribute to organizational complicatedness. Coordinators are a conventional solution from the hard approach. Integration is a function that people in all sorts of roles can carry out and often do. Their action in promoting help is quite simple, specific to the people and context – and their ability to find help makes them valuable to the groups being helped. The best integrators are active in the center of the business and can be both a resource and a constraint for people. Because of the way that the authors describe integrators, the following clues to finding integrators may help explain their function better. Potential integrators are:

• Those who express high levels of dissatisfaction at work….The dissatisfaction is usually the result of having to bear most of the adjustment costs because others are not cooperating with them. They may need to gain some power to become more effective.
• Those who are resented by others. Because some integrators have the power to force adjustment costs onto others, they may be resented. These people need to have a stake in others’ outcomes so that they seek the best outcome for others and well as themselves.

When groups cooperate poorly, it may be because the adjustment costs are poorly distributed between the parties. To induce people to cooperate, it may be necessary to force them to internalize some of the costs on non-cooperation.

Many managers could be better integrators than they are. Three changes that can support integrators include:

• Eliminate managerial positions that can’t have sufficient power to be effective in forcing cooperation. This often arises when there are too many levels between a manager and the people doing the work. These layers prevent the manager from understanding the work. Whereas most organizations think of delayering mainly in terms of cost saving, far more important is the way it can free up managers to really manage.
• Eliminate most rules that remove autonomy from managers. This is another form of increasing their power. Rules also create a need for compliance monitoring. Metrics can become rules, and force creation of processes to insure compliance. Rules are part of the web of goals, resources and constraints. In fact, it is common to have contradictory rules in use, with performance oscillating as the two rules trade salience. All rules require judgment to be useful – and this leads back to autonomy, which must then include the possibility of ignoring the rule. Just as well to eliminate the rule and go straight to using judgment.
• Eliminate peripheral metrics and use more judgment to evaluate people and actions. The idea that what gets measured gets done, can give rise to all sorts of metrics that do not actually capture the work – and especially the cooperative effort supporting the work. Managers spend time on the metrics and not on the work. Cooperation is vital but can’t be measured. One of the main reasons for intermediate metrics is to understand who to reward and who to punish. So you are stuck with measures that you can make but are useless to promote cooperation.

It is critical that managers create stakes for people to cooperate; it should be in people’s interest to cooperate to the point that they are exposed to risks when they do not cooperate. This is a key point: cooperating may be more risky for some in the organization than not cooperating. This also links back to the First Rule. Only by really understanding the work, is it possible to understand the risks and rewards of cooperation – and thus promote cooperation and the integrators that promote cooperation. This means that managers need to be present where work is being done, so that they can use their judgment to reinforce helpful behavior.

Simple Rule Three: Increase the total quantity of power

The discussion of power causes fits. Should it be centralized or decentralized? Does power corrupt leaders? As the previous section describes, if you want integrators to help drive cooperation, they need some power. The more an organization needs cooperation to address complexity, the more power you need in the organization. This is not a suggestion to redistribute power, but to actually increase it. The authors use an interesting definition of power: it derives from the possibility for one person to make a difference on issues that matter to someone else.

While the importance of power is well recognized, the hard and soft approaches have degraded the understanding of power. Hard approaches assume that power is a function of position or skill. Position may give legitimacy to power, but it does not create the power itself. Soft approaches assume that power is derived from charisma or personal ability to persuade. Using the author’s definition, the ability to make a difference for someone else can induce them to act either to gain a benefit or avoid suffering a penalty. Another way of putting it is that power comes from having control over uncertainties that are relevant to others and to the organization. This managers who lack the ability to make a meaningful difference lack power. But employees who can make a meaningful difference have power. For example, administrative assistants have a lot of power because they can make things much easier or harder for others to get what they want – yet they are not typically thought of as powerful. Consequently, power is always and only based on the relationships between people. When an imbalance exists, its basis is that one person can make a greater difference for a person than that person can make for them. Power is often context specific. I may be more powerful on some topics and you may be more powerful on others. Overall, the people with the most power, experience the lowest adjustment costs. Less powerful people, who face potentially high adjustment costs adjust their behavior to minimize them. If that means that I choose to cooperate when I otherwise wouldn’t, then another person’s power has made the cost of not cooperating too high for me.

In any organization, there will be a large number of people with power, as defined here. How they interact will determine both how the organization meets its goals and how much friction retards greater success. In most organizations, problems arise from an imbalance in power. Some groups, lacking sufficient power, must provide more cooperation than they receive- and their goals suffer for it. In some cases, the entire organization suffers for it. A subtle point is that the solution does not involve redistributing power away from a dominant party (making them weaker), but it involves giving the weaker party more power. In a simple world, redistribution might work. In a complex world, more power is needed, because more cooperation is needed. In another subtle point, the author observe that cooperating with others involves a risk. If I help someone else, I am not accomplishing the goals I am responsible for. I might assume that I will get reciprocal help that will allow me to meet my goals, but if it is not forthcoming, I (and my goals) will suffer. Thus if I feel powerless, I will cooperate as little as possible in order to minimize my risk. The more influence you have over the behavior of others, the more you can take the risk of becoming dependent on what they do….power determines the capacity to enter into the kind of cooperative interactions and reciprocity of action that are essential for addressing business complexity. Redistribution is a zero-sum activity, and dealing with complexity requires more power.

The primary way that power is increased is by creating stakes for people. We often talk about stakeholders without fully thinking about what this means. Dictionary.com defines this sense of stake as, ”to possess, claim, or reserve a share of (land, profit, glory, etc.)” and Macmillon.com includes uncertainty in its definition, ”the things that you can gain or lose by taking a risk, for example in business…” A stakeholder shares in the uncertainty of gains and losses, and will be motivated to increase gains and decrease losses in their stake. The ability of people to create new stakes is an expression of power.

 

The book cites the example of a retailer where increasing centralization had removed most of the power that store managers had. Employees understood this and paid little attention to the store managers. Because the managers lacked resources (and power is a resource), they spent their time on administrative tasks and ignored system wide initiatives intended to increase traffic and profit. In this case, the company set a policy for checkout wait times and then gave store managers the power to choose which employees would be diverted from other work to checkout. This seemingly trivial change (they didn’t have that authority previously?) had a huge impact on store performance. Non-checkout employees suddenly had something to gain or lose in their interaction with the manager that was not previously present. This, in turn, increased the ability of store managers to deliver on company initiatives and decreased the power imbalance between the central functions and the managers.

The book goes on to emphasize that perfectly uniform power is not desired; rather the goal is to eliminate large imbalances which practically means more power. That is because when you create power, there has to be enough of it to be used. If the power falls short of this threshold, it is not a resources; it is a constraint. This is why managers do not use the power they are given, because it is not enough to make a difference.

Organization design must cope with power imbalances as it seeks to gain the benefits of having focused work (on product lines’ routine execution) and also having the benefits of a project organization (that focuses on non-routine work). Power in these systems oscillates between the line and project functions as they try to find the right balance of power. The oscillation between standardized central processes and specialized distributed processes provides another case where power can get out of balance. This is because organizations often attempt to deal with such problems by taking power away from some groups and giving it to others. The power-deprived groups lose their ability to cooperate and their ability to adapt to the complications they face. Don’t think of organizational design in terms of structures, processes, and systems….should we organize by customer segments, geographies, or functions….Instead, think of organizational design in terms of power bases and the resulting capabilities. Capabilities are concrete behaviors, embedded in people with power and interest to do something. What do we want our organization to be able to do tomorrow that it can’t do today?

The first three rules are designed to increase autonomy. As explained, cooperation is fostered when individuals have enough power to make a differences for others. However, the first three rules do not promote cooperation – they simply enable it. The last three rules promote cooperation. Dealing with complication requires autonomous people, who can agilely decide and act, and it requires people to work together to cope with the issues being faced. The last three rules are about using the group to leverage people’s autonomy. Their effect is to enhance the individual’s judgment and energy.

Simple rule four: Increase reciprocity

As mentioned previously one of the problems of imbalanced power is that people with less power bear more of the adjustment costs, and this inhibits cooperation. Increasing reciprocity creates a feedback loop so that people are exposed to the consequences of their actions. Non-cooperation results in non-cooperators suffering while cooperators gain.

Organizations seeking improved performance often use the hard approach to clarify roles and increase accountability. This makes it harder for people to cooperate and thus perversely decreases performance and agility. This conclusion is explained in terms of three myths about roles and objectives. All three myths challenge well-known best practices.

• The more clarity the better. Having confusing roles is not beneficial, but extremely clear, detailed roles deprive people of information about their interdependencies. When this is YOUR objective and YOUR resources, it is easy to think that you are limited to that goal and those resources. This is the natural consequence of clarity. Excess clarity promotes sharper boundaries between the objectives of different people. You hear much more “not my job” when roles are clear and focus on objectives is emphasized.
• Cooperation dilutes personal responsibility. It is a myth that groups can’t be responsible and it may be a bigger myth that the most important results can be the responsibility of an individual. Most important outcomes are the result of inter-dependent action by many people, but we give all the credit (and blame) to an individual.
• Interdependency destroys accountability. The myth relates to the idea that to be accountable, we must have complete control over a result, including all of the resources required.

The real goal is better performance in the face of a complex environment and complicated objectives. This environment does make work easy and a common approach to coping is to attempt to simplify. Eliminating ambiguity sounds like a useful simplification, but clarity can also become a constraint. You can imagine someone saying, “That is an important task and completing it would be good for the organization. I’d like to cooperate with you to complete it, but it is not in my objectives for the year and I do not have the resources to spare.” If clarity can be a constraint, then some fuzziness can be a resource. Rather than being bound by an objective, a person can use a fuzzy objective to explain their cooperation. “It seemed related to my objective of promoting safety, so I helped them out.”

The book observes that autonomy and self-sufficiency can have a similar look, but quite different consequences. Autonomy is about fully mobilizing our intelligence and energy to influence outcomes, including those outcomes that we do not entirely control. Self-sufficiency is about limiting our efforts only to those outcomes that we control completely without having to depend on others. Self-sufficiency is the result of eliminating interdependencies, which may be the result of creating a silo or having a monopoly-like grip on power that imposes all adjustment costs on others while facing no adjustment costs. Self-sufficiency assumes that all problems can be solved with the resources already acquired and does not allow for the effect of change and complication.

An alternative to clear roles and accountability may be “rich objectives”. Rich objectives combine collective objectives (the outcomes of the group), individual objectives (what each individual contributes to the group but which do not depend on others’ efforts) and overlapping objectives (objectives that express the person’s contributions to others’ output). Collective and individual objectives are straightforward and commonly in use today. The authors observe that individuals simply executing an established pattern of tasks tend to add minimal value. This is because there is always a distance – a gap – between real situations and what is defined by procedures. The gap can only be bridged by people using their judgment to best apply procedures. Bridging that gap is how people add value. The grater the complexity of multiple and contradictory performance requirements, the greater the distance between situations and what the rules can instruct. Individual objectives focus on the objectives where people may need help. In contrast, overlap objectives focus on the work where people must provide help. Overlap objectives ought to be valuable to both the individual and the company. Individuals may learn by helping others in ways that enhance their career prospects or have an interesting experience, in addition to any concrete benefits they might receive. The goal is to encourage cooperation rather than mandate minimal compliance – and this goal is in service of the larger goal of high performance.

Most outputs are easy to measure using common business metrics. When the problem is poor cooperation, there may be no measure that shows this problem directly. Measuring cooperation is difficult. Consequently, judgment is required to assess cooperation. This is related to Simple Rule One: understand what your people do. Managers need to be present in the workplace to see people at work, to see cooperation (and its absence) directly.

Goals are one lever to increase reciprocity, but three reinforcing mechanisms can be useful in removing sources of resistance.

• Eliminate internal monopolies – Functions and departments develop and concentrate expertise in aspects of the business – an advantage in effectiveness of execution. But when they develop a monopoly on a necessary function, other units have no alternative but to work with the monopoly….monopolies do not take into account the needs and constraints of those units. Because they have total control over their own resources, monopolies can work around their own constraints. When they cooperate, they can force all adjustment costs onto other units. Examples of potential internal monopolies include legal, R&D, and finance. They can reject attempts to decrease their monopoly power on the grounds that they have special knowledge, experience or expertise. Two approaches include: removing their unilateral decision power and allowing partial substitution through alternate inside groups or permitting people to go outside of the organization on their own.
• Reduce some resources – When resources are plentiful, each person or group can act alone. These resources are not used to create value, but just to allow dysfunctional self-sufficiency and often to create monopolies. The abundance of resources basically removes interdependencies and the need to cooperate. Remove the resources, keep the same goals, and you have conditions that force people to share. The goal of reducing resources is to enhance capabilities, not cut costs. This is a critical point and why some thought must go into “some” resources. Across the board cuts simply decrease cost without regard to how people work. And if the wrong resources are removed, this will simply put more work onto the people left behand. This increases the risk of disengagement and burnout – which doesn’t improve performance. A reduction in resources may lead to eliminate of unnecessary procedures, “checks”, and oversight, in order to direct remaining resources to more valuable work.
• Multiplexity: create networks of interactions – Multiplexity involves people belonging to multiple networks within the organization. Rather than being confined to “silos”, people work with people in a range of other units. Communities of practice or business clusters are example of potential networks that would be distinct from a person’s base network. All of these networks should be devoted to related work so that the different networks deliver different parts of the outcome – the networks cooperate with different overlaps for different people. This sounds complex, and it is in many ways. But the philosophy is to encourage cooperation between autonomous people. These networks can serve the function found in “middle offices” that attempt to coordinate work between units, but mostly add complication. The book uses an analogy with a relay race to describe aspects of cooperation – and observes that there is no “coordinating sprinter” to help the baton pass. “Middle offices” decrease the need for people to interact directly and execute their work because the middle office handles the exchange. Contrary to the concept of these offices facilitating cooperation, they may just increase complication.

Simple rule five: extend the shadow of the future

This rule is based on a concept from game theory. Essentially, we can ignore consequences far enough in the future because their shadow is not visible to us. By extending the shadow of the future back to shade us today, we become more sensitive to the consequences of our current actions. Extending the shadow of the future creates a feedback loop. Many organizations are focused on short-term outcomes because short-term feedback loops are much more powerful than longer term loops. This is a rebalancing.

One of the major reasons that people remain unconnected from the consequences of their actions is their organization’s adherence to the idea of strategic alignment. Strategic alignment is a tool from the hard approach and may be as simple as trying to eliminate activities that inhibit execution of the strategy. But most organizations are not expressing this truism as much as taking a more controlling approach. Strategic alignment contains three traps.

• It is mechanistic and turns the organization into a “stupid” machine. For example, imagine the company discovers a quality problem. The mechanistic response is to add a quality department/czar/coordinator. This reflects a perspective that strategy leads to structure and that every strategic element must have a structural element to execute it. The organization becomes more complicated.
• It assumes linearity between levels in the strategy and organization. For example, strategy is the basis for designing structure, processes are aligned within the structures and then systems are aligned to processes. Finally, the people are selected and organized based on the systems and processes. But the purposes of different parts of the organization are different. This alignment does not recognize that. The front office functions may be focused on flexibly of action, while the back office functions are focused on standardization. Middle office functions are created to bridge this gap (the strategic alignment) instead of making the two groups find a joint solution. This makes a weaker, less agile and resilient organization.
• In turn, bad organizations create bad strategy. Complicated organizations have a fragmented view of competition, customers, and even their own organization. This may lead a complicated organization to become more complicated, to have a more complicated strategy and structure – and risk making the organization either more stupid or less capable.

The conventional strategy-to-structure strategic alignment decreases the role of autonomy and judgment in making decisions. Expressed differently, it sets a path into the future and disables the ability of individuals to see and explore alternatives to that path – even in minor ways that could improve effectiveness. The book suggests four methods to create a stronger feedback loop from the future to the present.

• Increase the frequency of interactions between people expected to cooperate to make feedback loops tighter – which can be done by creating more frequent milestones. Lack of cooperation and progress is visible much faster. Even if the cost of non-cooperation is “just” embarrassment, people respond quickly to this feedback.
• Insure that people engaged in a project today remain responsible for the outcomes at the point of launch. Don’t let people behave badly and escape the consequences. Similarly, making projects much shorter may make the normal rotation of people through roles in the on-going business more like the project life cycle. The goal is to make people feel like they are in the project from the beginning to the end.
• Tie the futures of people together. This might be framed as the concept that a person can’t be promoted until a number of successors are ready. This encourages the manager to expend effort on development. Developing people and increasing productivity are contradictory goals, but the tied-future provides a lever for balancing the two.
• Make people walk in the shoes they have made for others. This is best understood through an example. Designers of systems for new cars were made to spend the first few months after a new car launch in dealer repair shops to help repair the new cars. This motivated them to design cars that would be very easy to repair because they experienced the frustration of repairing poorly designed cars directly.

When the shadow of the future is brought back to the present, the consequences of poor performance and cooperation become clear to people. They will want to prevent future problems and that means that they need the autonomy to act. It would be absurd (and unjust) to expose people to the consequences of their actions without giving them enough say in how they can act or by preventing them from taking actions that might have an impact on future results. If an outcome makes a difference to you, you should be able to make a difference in the outcome. Disengagement will result if people are made powerless to avoid a problem that they are capable of avoiding. This leads to the assertion that: engagement…is prospective, not retrospective. People do not choose to engage as a result of gratitude for how things have gone in the past, but rather as a reflection of what it will bring them.

Simple rule six: reward those who cooperate

While the rule specifies rewards, this section of the book focuses more broadly on the ways that managerial dialogue with the organization should change. While beginning with rewards, the latter part of the chapter discusses broader ways to stimulate cooperation. Many organizations create rewards based on individual contribution and outcomes. They may ignore cooperation or even punish cooperation that takes away from the individual’s output. In order to promote the cooperation that is needed to complement autonomy, organizations must reward the people who cooperate and not reward those who don’t.

Most organizations reward based on a set of what the authors call “technical criteria” which encompass things like budget, deadline and tangible goal compliance. These are common and important business metrics that are attributed to a person. Rewarding cooperation requires supplementing such measures with judgment-based measures. One of the things that managers need to look for is the failure to help others. The need for help may be so inconsistent that it can’t be made a “positive” measure, but when you observe someone failing to help, that could be a demerit. It is important to shift some of the cost of uncooperative behavior to the uncooperative person. Many organizations play a game of target setting that discourages transparency and prevents groups from achieving their full potential. The managerial dialogue around performance evaluation should use people’s knowledge to best effect and to encourage innovation. The game playing is designed to shift costs elsewhere among the stakeholders.

The book cites a case study of a train service that struggled with on-time performance with a good portion of the problem being attributable to lack of cooperation between departments. Goals were set on a departmental level and failures were attributed to other departments’ bad behavior. However, when bad weather created problems for the system, departments regularly pulled together to cope while keeping the system functioning at nearly normal levels. The external condition overcame the normal inhibitors to cooperation. So the organization was capable of cooperating, but the incentives to cooperate where lower than the incentives to not cooperate. This posed the question, what performance criterion could it use to create a context within which cooperation became the best choice for team members? Analysis should that a previous attempt to improve performance through a “monitor” had created the incentive to avoid being to blame for delays. Major delays created investigations and investigations created guilty parties. Other departments were resources to deflect blame on to. This made cooperation unlikely, and maybe even undesirable (how could you blame them, when you were working together?) To change this, management focused evaluation not on the cause of the problem, but on the help given to solve it. Departments were also expected to continuously improve to decrease technical sources of delay, but significant emphasis was placed on cooperative resolution. In addition, station managers at the front line of the delay’s impact on customers were asked to help in the evaluation. On-time performance increased to 95%, thousands of hours of investigations were eliminated, and department employee job satisfaction increased significantly. The real change for departments was the context of their interaction (“find the failure” to “publicize the help given”) that changed the incentive for cooperation.

The book suggests that people confuse business steering (measures of the whole business), performance management objectives (measures of the individual’s performance, both quantitative and qualitative), and rewards (the tangible and intangible things given to employees in return for their contributions). Balanced scorecards often become a way that the three get mixed up. A very hard approach, business metrics become personal metrics that directly lead to financial rewards. Such an approach has a very high risk of suppressing cooperation because cooperation can’t be measured, the fruits of cooperation will go to someone else, and the cost of cooperation will fall on the individual helping another. All too often, a company chooses performance assessment criteria to link things that go well or badly in operational processes to specific areas of responsibility. The more direct, accurate, and clear the link, the more it thinks it has the right assessment system. But the proper goal of an evaluation system is not to be technically right in this link. Rather, it to elicit full engagement and cooperation. So, in using an evaluation system, ask: “are we trying to be true to the technicalities of the job description or trying to generate engagement and cooperation?” It is a different understanding of the purpose of the evaluation system; one that focuses indirectly on the outcome rather than directly.

The approach an organization takes to failure might reflect attitudes to risk and cooperation. It is common to talk about risk-averse people or cultures. This is wrong. In fact all these issues usually have nothing to do with people’s particular psychology or mindset. Most often they are organizational and practical matters of cooperation. Risk is not a goal in itself. What matters is the effect on organizational performance and individuals. Risk-taking is a good thing only when there is cooperation. Only cooperation can make risk-taking a rational strategy for the individual. Since most decisions are ultimately made by individuals, the ability of an organization to take a risk hinges on the confidence that cooperation will be available to mitigate the risk.

Extending the shadow of the future has a role in rewarding cooperation and (not rewarding) non-cooperation. Supervisor-subordinate conversations often have elements of blame seeking and avoidance. These deflect and distract attention from solving problems. So rather than focusing on the problems that the subordinate has, a supervisor could focus on what problems the subordinate causes for others. In a highly cooperative environment, the answer should be that few problems are caused for others. And the fact of persistently asking this question will create an incentive to prevent such problems – which may become a form of proactive or highly responsive cooperation.

A similar dynamic occurs in the setting of annual business goals. Senior management sets very high goals because they know departments will propose low goals. Departments respond with the expected low goals that they feel they can certainly achieve. And through a negotiation process, the department is given a stretch goal. Department leaders are fully aware that overachievement will just make the future goals higher and that some projects will not delivered as projected. Altogether, the department leaders try to arrive at a set of goals with minimal dependence on others and with minimal consequences for future years’ goals. This approach also minimizes the appetite for new things – because they are even less predictable. The overall consequence of this is that businesses do not set their target at the full potential of the business – because that is a rational strategy for them that is well known by everyone but essentially non-transparent to everyone too. Nobody really knows what opportunities other businesses are avoiding out of fear of being unable to guarantee success. It is this avoided risk (and opportunity) that could be solved by cooperation. To access this opportunity, the authors suggests three questions from executives to business leaders:

• What will you do to improve performance next year and what will be the results in terms of savings, product launches, or revenues?
• What are the personal risks to you in setting up this target? For example, do you have to rely on new kinds of suppliers, try different processes, or require the cooperation of one unit or another?
• How can I help you get the cooperation you need from others to mitigate that risk?

These questions acknowledge the desire to grow and the risk that the individual must take to change. It also acknowledges the supervisor’s role in integrating across the organization in support of cooperation. This also brings the consequences of risk avoidance to those individuals who are avoiding risks that should be taken for the organization.

Remember that organizations have many problems, not because people are stupid, but because they adjust very effectively and intelligently to the counterproductive context that management unwittingly creates. The hard and soft approaches to management create complications and people strategically react to the complications.

Managers within an organization have vested interests, and this inhibits cooperation. Creating conditions that suppress the interests help those people cooperate better and lead to less biased outcomes. For example, a manager planning a reorganization told his subordinates that he was going to keep all of them in his team, but he would not decide assignments until the new structure was decided. This weakened their individual investment in any particular department and improved their view of the whole enterprise.

There is also a tendency of subordinates, who are struggling over an issue, to escalate the issue for resolution at higher levels. This avoids cooperation and retains the possibility of having a winner and a loser. This must be avoided – refuse escalation. Just say no to the request to arbitrate. The book says to put the parties in a room and let them out when they have the resolution. And when timing does not permit the situation to continue without arbitration, the manager must tell both (all) participants that this will be used in performance reviews. People needs to know that there are negative consequences for failing to cooperate.

The effect of escalation can be pernicious. As decisions are escalated to higher and higher levels, the decision makers are farther from the concrete reality of the work situation and more deprived of rich and fresh information. So whenever decisions takes place at a level above that of the real action, the decisions are bound to be of lower quality that that which could have been achieved through direct cooperation of the people directly involved. Expressed differently, decisions may be slower and of lower quality.

Summary

This is a long summary, so here is a repeat of the initial premises. The world is increasingly complex and no organization can do anything about that fact. The conventional approaches to management can be termed hard and soft. Each approach’s methods to cope with complexity lead to organizational complication which makes the organization less agile and responsive. The antidote to this complexity is to lean more strongly on the judgment of its people by provide them greater autonomy AND by requiring greater cooperation between people to insure that the best solutions can be created to solve the problems.

People in the organization react strategically to their problems using the resources and constraints around them to achieve their goals. Rarely is the absence of an organizational element (a policy, coordinator, or structure) the problem, but the presence of an organizational element may be. Rarely are defective attitudes or mind-sets responsible for the problem because people are reacting strategically to the organizational elements around them. Too little attention is paid to what people do in these environments and too much attention is paid to what they don’t do. This is backwards because their actions reflect the complication that surrounds them.

Some conditions make it much easier for people to avoid cooperating, including an overabundance of resources, the presence of monopolies over certain work, and insufficient power to take the risk of cooperating. The six rules are intended to increase both autonomy and cooperation and provide an alternative to both the hard and soft approaches. Though the rules are simple, applying them is not. Like all such changes, they require time to become fully effective. Implementing the rules might start with making people fully aware of the costs of non-cooperation – but not by seeking to identify who creates those costs. Avoiding the search for root-cause fault and blame, but focusing on the benefits of cooperation in the real concrete world decreases anxiety This sets the stage for increasing power in the organization to cooperate and make decisions in real-time based on direct knowledge. It does not take a complicated structure to cope with complexity. It takes people working together using their expertise to cope with complexity.

In recent decades, management theory has been adding complication in the form of KPIs, complicated reporting structures, focus on style (personal and organizational), best practices, structure (centralize/decentralized) . All of this is an abstract response to complexity. To have an authentic management presence, you have to regain direct knowledge of operations and escape the abstractions and symbols that are meant to represent work – structures, procedures, KPIs, and the rest – but that push management to the periphery of work....The more organizations harness the power of digital technologies, disperse globally, and operate in virtual teams, the more we need to shed light on what has become increasingly obscured: the actual work real people do.

Comment and interpretation:

• A long running comparison of leadership and management might also be a comparison of soft (leadership) and hard (management) styles. One interesting point made by this book is that these two styles are different means to achieve the same end – control and predictability. What the book suggests pretty clearly is that the structural approach through structures, roles, and accountability is not suited to an environment that requires agility. The only way to be agile is to provide autonomy and power. It is not uncommon to see the lack of agility blamed on rigid bureaucratic structures. Many books on innovation describe a need for autonomy. What is different is that this book also blames softer approaches for also removing autonomy – just in a more subtle way.
• One of the results of complexity is that people may feel bad about their difficulty in overcoming its obstacles and disengage from the work. …managers use the soft approach, ostensibly to help them feel and work better. Managers then assume they have addressed the problem, even though they have only addressed the symptoms. Paradoxically, this puts the onus for continuing disengagement on the victims themselves. If problems persist…it must be because there is something wrong with the psychology of the people involved – they have a bad attitude or the wrong mind-set. They just don’t get it. A persistent theme throughout the book is that people respond to the system that they are part of. It is much easier for managers to blame the people for problems than to address the systemic barriers to good performance and engagement.
• Continuous improvement efforts make a big point of “Understanding what your people do” because this is the foundation for improvement. Process improvements based on theory fail to acknowledge that some “stupid” actions are actually strategic in the sense mentioned above. This problem is probably most acute for general managers who oversee many kinds of work. For example, a person who begin their career in accounting probably does not understand the work of a R&D product development, and the reverse would be equally true. People who advance through their function before gaining oversight of other disciplines might be especially at risk of proposing remedies that fit their “own function” very well, but others very poorly. The kind of experimentation and risk taking necessary in R&D would be inappropriate for accounting groups and the kind of adherence to procedure useful in accounting could be fatal for R&D. As work spans boundaries, the procedures that could be usefully standardized probably diminish because they do not reflect the work people actually do. In my own experience, implementation of a new ERP created procedures that were a poor fit for the sort of work R&D does (which is dominated by non-routine purchases) but was presumably a good fit where purchasing was much more regular and predictable. This created a new layer of complication for R&D activities, but not necessarily others.
• An extreme example of the impact of monopolies is the power that a monopoly provider has over its customers. They are in position to force all costs onto the customer. This naturally creates an opportunity for a competitor to develop a proposition based on decreasing the adjustment cost. The same sort of phenomenon occurs inside organizations when one department or organizational level can force all the adjustment costs onto another department or level. This is common when a function strives to optimize their own work without regard to the problems that it creates for others. Because, competition for supplying the output of that function is suppressed (few companies have competing Finance departments), a group faced with excessive adjustment costs seeks opportunities to avoid the cost. This is a nuisance for the monopolist party, increases complication, and may or may not impede the organization’s ability to meet its goals. It is possible, that strategic non-compliance may create advantage that is interesting. In this context, consider all of the stories of innovations that evaded a company’s efforts to eliminate it – before breaking through to great success.
• Increasing the power in an organization may seem abstract, but I think a good example comes from recent military history. The Soviet Army is very hierarchal with generals giving orders and troops expect to follow them exactly. This works adequately in conventional warfare between armies, but less well in rapidly evolving situations or when confronting irregular forces. In contrast, US forces also has generals who issue orders, but they now accompany those orders with a statement of commander intent. The generals recognize that circumstances may be different in actual combat and that tactics will be different than planned. Rather than waiting for new orders, lower level troops are expect to make their decisions with the intent in mind. This gives the troops more agility, quicker decision making and since their decisions matter to the troops around them – power. I have read that the Soviet army had much better generals than the US Army, but that we (the US) believed we had the advantage because we had much better sergeants. In actual combat, sergeants matter more. Giving them the power to make a difference is a big part of why US forces succeed in combat.
• Engagement as an evaluation of the future is a different perspective for me. Managers who ask for examples of past failures may be missing the point; the concern is with the future. Is the better question something like, “What should change in our organization to make it easier for you to do your work in the future?” This skips over all sorts of specific hypotheses (communication, coworkers, trust, etc.) and goes straight to the point.
• The book had an interesting comment about engagement and aging workers. Many companies worry about finding workers in the future with the right skills and experience. But they miss the much more significant issue of declining productivity that results from disengaged employees who know that that their next career move will be and can only be retirement. When the trajectory is defined in advance, the future has no shadow and there will be no engagement. The process of wear that accompanies the passage of time is accelerated. Mature employees to not age an enterprise; the enterprise ages them. The authors go on to say that this is not a question of legal retirement age as much as insuring that people feel that their current efforts make a difference – that their shadow has a future.
• I am often struck by the number of people who want to check with their managers before responding to a request for help, or have forms to complete before doing work for you – where the questions in the form will be used to justify their contribution later. I have always thought that this is a major source of delay because people lack the autonomy to say yes or no. And I had understood that they felt they were taking a risk in not checking. I had understood that it was a rational strategy for dealing with their organization. But for me, it is a frustration that makes me wish for more alternative sources of cooperation. The idea that cooperation is the cause for this sort of CYA risk avoidance is new to me, and makes me wonder what I can offer in cooperative terms to compensate them for their risk taking.
• The book has an extensive set of footnotes. One interesting footnote relates to the human relations movement. At the root of the human relations movement is the desire to save people from themselves. This desire relies on the more or less explicit assumption that employees are fundamentally irrational and that their behaviors are driven by emotional stimuli that have to be contained, channeled, and thus controlled. If scientific management views money as the right stimulus, the human relations movement views belonging and acceptance as the right stimuli. Both are essentially Pavlovian views of humans. Modern psychology has shown that people are much more strategic than that. The success of the human relations movement is assured though by the implication that managers are superior in this regard to their subordinates and therefor positioned to manage them emotionally. And if they do not respond “correctly”, it is the employee’s fault.
• Also from the footnotes: Cooperation is often used synonymously with coordination and collaboration. But there is a difference between these three terms, and that difference is not inconsequential. Collaboration is about teamwork as people get along, based on feelings and good interpersonal relationships….Coordination refers to allocating an order of some sort among predetermined activities that have to be made compatible…. Coordination…involves directly taking into account the needs of others in creating a joint output….Collaboration refers to…working side-by-side….and there is no notion of output…Cooperation relates to…sharing an opus; there is a clear emphasis on joint goal, output, and result….Coordination…relates to setting an order in terms of sequence and/or importance among decisions, actions, or resources. These definitions help understand that collaboration and coordination are not really result-oriented. Cooperation is result-oriented.

*text in italics is directly quoted from the book

See also: https://www.ted.com/talks/yves_morieux_as_work_gets_more_complex_6_rules_to_simplify?language=en